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Ten rounds of hell for the Socialist government in 2011

25 November 2010 / 17:11:39  GRReporter
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Ten challenges for the Greek economy to recover defined the mission of the International Monetary Fund, the European Central Bank and the European Commission. Their mplementation will guarantee the payment of the fourth financial support tranche to Greece. Under the Memorandum of financial support Greece should receive the fourth tranche of 15 billion euros in March 2011. The third tranche of 9 billion euros has been confirmed finally and it is expected to be paid within a month and a half. Its payment was hanging by a thread after it became clear that the Greek government, regardless of the stringent economic measures taken this year, failed to implement its revenue budget.

The Minister of Finance George Papakonstantinou presented a detailed plan for the reorganization of the Greek government finances in 2011 and only its strict implementation will ensure the support of international partners in the future. The PASOK government made a list of 10 challenges (others would say insurmountable problems to date) in the process of fiscal consolidation, the solution of which will give Greece a chance to regain confidence in the future.

Public expenditure management and control are the first in the list of the Ministry of Finance, which is trying to turn the Greek public administration into an effective and financially adequate system of state institutions under the supervision of the Troika – the International Monetary Fund, the European Central Bank and the European Commission. A tight control over the budget implementation is necessary and medium-term economic framework for action is needed to be built by June 2011. It will not contain all the detailed measures to be taken for the period 2012-2014 but it will outline the guidelines for cost reduction, revenue increase and economic growth recovery.

"The 2011 measures focus on real problems in the system - the huge deficits of state enterprises, frivolous spending in health care sector, serious problems with tax unfairness, the big cost issue and the poor public sector management in general," said the Minister of Finance Giorgos Papakonstantinou. Solving these problems is the basis for overcoming the 10 challenges for fiscal consolidation not only the next year but in the long run.

The serious problem with tax evasion in Greece will finally become a priority in the fight to restore economic stability. Two laws will be voted by January 2011 that will give more freedom to the tax authorities to act more freely where serious breaches are suspected. The first step in this direction is the restructuring of the Ministry of Finance as it is expected 100 regional tax offices to be cut or merge with others. The second is the complete reorganization of tax administration, which will be announced early next year.

The Troika and the Minister of Finance George Papakonstantinou completely agreed that 2011 would be extremely difficult although the budget deficit should be reduced by only two points from 9.4% of GDP at the end of this year to 7.4% of GDP at the end of 2011.

An important step for implementing the program for deficit reduction is the costs cut of unprofitable public enterprises that have been operating at a loss for years and have accumulated billions of euros in debts. The Greek government is obliged to prepare a comprehensive proposal for the closure and merger of public entities in the first quarter of 2011, and to review the overall framework of corporate management in public companies. The expected benefits of cost cuts in public companies are 800 million euros only for the next year. The first in the list is the state railway company with partial privatization, public transport in big cities with travel routes optimization and closing or tightening of the budgets of all other state enterprises.

Fourth in the George Papandreou’s government list on "What should I do next year to get money?" is the reform in the public administration management. One of the important tasks here is the change in the civil servants appointing system. The Financial Minister announced that due to the severe economic situation and the still more intrusive public administration appointments in public sector the next three years will be made on the principle one to five. This means that for every five retirees only one new employee will be assigned, approved by the Council for recruitment in the public sector (ASEP). About 40,000 retired are planned for 2011 which means that not more than eight thousand new employees will be assigned.
 
The public administration reform includes the introduction of a unified payment system for salaries, which will finally bring equality in the salaries of employees of the same rank in different ministries. A working group will be formed in the middle of the year to improve the education system as well as two studies will be developed in collaboration with the Organization for Economic Cooperation and Development - one for the overall efficiency of public administration and the second on the effectiveness of government social programs.

Tags: EconomyMarketsCrisis
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