Athens, 30 Jun 2009 

Speech by the Greek Minister of Economy and Finance in an event organized by 5 bilateral Chambers

Ladies and Gentlemen,

I would like to congratulate the boards of the five bilateral Commerce and Industry Chambers for their initiative to hold this important event about Greek economy.

This is an initiative that acquires greater importance in the current critical for the global and the Greek economy conjuncture. The discussion developed in the context of this event will lead to important and useful conclusions about the enterprises-members of the bilateral chambers and, generally, on the course of the country's economy. The policy and strategy we are implementing for the economy will become clearer and more articulate.

Our strategy was and remains clear and specific. Before the crisis, as well as today. It is clear with respect to the effort to deal with the consequences of today's difficult conjuncture. And it is equally clear with respect to the creation of the conditions of the day after.

Our Government, since it came in power in 2004, has been trying to reverse the chronic structural problems that undermine the prospects of Greek economy. These problems are not limited to the economy. They also adversely affect Greek society.

We immediately initiated a large effort to enhance the competitiveness of Greek economy. Let me mention indicatively:

• We have reduced tax rates on enterprises from 35% to 25% in 2005-7, and from 25% to 20% for private limited and unlimited companies. We have promoted the gradual reduction of tax rates on natural persons -from 40% and 30% to 35% and 25% respectively- in the 2007-2009 period. We have overturned a long-standing mentality that would have citizens and enterprises paying for the public sector's extravagant expenses.  Furthermore, we have created the institutional framework for the further reduction of the tax rate on enterprises and natural persons to 20% down from 25% for the 2010-2014 period. I would like to remind you that we have been accused and are still being criticized by PASOK for this policy.  This is the party which, judging from its proposals, believes that citizens and enterprises should continue to pay indefinitely for the squandering of resources by the public sector.
  
  
• We have promoted a series of initiatives for simplifying the institutional framework governing the establishment and operation of enterprises. The battle against bureaucracy is difficult, but we will persevere. For the first time, we are implementing a Programme for Administrative Reform, worth 631 million euros, with the aim of reducing the cost of bureaucracy by 25%.
  
  
• We have planned the new Investment Law, through which more than 6,000 investments are being supported, worth a total of 12 bn. euros, and 28,500 new jobs are being created throughout the country.
  
  
• We have instituted Public-Private Partnerships (PPPs). These constitute a ground-breaking development tool, through which investments worth a total of 5.7 bn. euros are being made today, funded through private funds, for the construction of 327 social infrastructure projects.
  
  
• We have accelerated the implementation rate of the 3rd CSF, which is today being completed at 100% resource absorption. Not a single Euro has been lost.
  
  
• We have planned and consistently implement our Digital Strategy. In the last 5 years, the percentage of citizens using the internet for their dealings with public services has more than doubled. From less than 8% in 2004, it has risen to 19% today. Furthermore, in March 2004, broadband penetration among the population amounted to a meagre 0.1%, while today it approaches 13.4%.
  
  
• We are implementing the largest project construction programme ever seen in Greece, worth 19 bn. euros. We are tripling Greece's motorways and we are upgrading infrastructures in ports and airports.
  
  
• We are completing the National Land Use Planning and the Special Frameworks for tourism, the industry and the Renewable Energy Sources.
  
  
• We are working towards the completion of the Hellenic Cadastre; within two years, 2/3 of the country will be recorded in it.
  
  
• We have established a new institutional framework for Renewable Energy Sources, resulting in the tripling of installed capacity from clean 'green' sources.
  
  
• We have made important steps towards improving our educational system.
  
  
• We are investing in research, innovation and new technologies, through the creation of a modern institutional framework, with the increase of the available funds, and by creating Regional Innovation Poles.

This is the reality. All of the above, and more that I can not mention due to time restrictions, have already been implemented. Greece, in spite of all those who seek to distort the facts for their own personal ends, has changed to the better.

Ladies and Gentlemen,

The reformist efforts of the Karamanlis administration, as well as the budgetary adjustment carried out since the first months of 2004, were interrupted by the financial crisis that erupted in the summer of 2007. The crisis began affecting the real economy intensely since the fall of 2008, following the collapse of Lehman Brothers. We were forced to devise and implement a strategy to deal with the consequences of a crisis whose real extent and duration no one in the world could clearly know.

The crisis brought to the fore and intensified two chronic problems:

The first one is deficit and chiefly the soaring public debt, which was accumulated in the 1980s and maintained in the 1990s.

The second one is the diachronically low competitiveness of our economy, which is today reflected in the elevated current account deficit.

These problems, which should have been dealt with during the past two decades, today require immediate, specific and permanent solutions. The Government is moving decisively towards this direction, implementing a specific and comprehensive plan.

The most important among the keynotes of this plan pertains to the reduction of deficit and debt. Our goal is to reduce deficit to 3.7% of GDP in 2009 and below 3% in 2010. We have already promoted a series of significant measures in this direction.

Today, notwithstanding the fact that the repercussions of the crisis are affecting our economy's growth rate and the public sector's figures more acutely than originally predicted, we are determined to uphold our goals and commitments. Any other alternative, albeit less injurious politically, would ultimately prove detrimental to the credibility and the prospects of Greek economy.

In this context, following an evaluation of the real data for the first semester of 2009, last week we announced a series of additional measures. These measures are certainly not pleasant, yet they are necessary and as equitably apportioned as possible. They are necessary in order to balance the additional revenue losses brought about by the crisis. They are also equitably apportioned, for the major part of the cost falls upon those who demonstrably have greater economic capabilities and can contribute to the national effort.

At the same time, we are determined to move ahead with a series of targeted changes, of a structural and permanent character. These are changes that will secure greater effectiveness in the handling of public expenditure and will help combat tax evasion. These changes are fully aligned with the European directions about the role the state must hold in economic activity.

With respect to dealing with tax evasion, we will proceed as follows:

1. We are planning and implementing a new generation of cross-checks, combining information from different sources, in order to target the areas of major tax evasion.
   
   
2. We are modernizing tax legislation with respect to intra-group dealings and capital underfunding of enterprises, so as to limit the phenomena of artificial shifting of profits or presenting decreased profits.
   
   
3. We are also proceeding to similar improvements in tax assessment mechanisms, and the first positive results are already observable.
   
   
4. We are already proceeding to implement a series of targeted measures, already announced, to combat tax evasion, as in the cases of private yacht owners, doctors and lawyers, who exhibit elevated levels of delinquency.
   
   
5. We are moving ahead with the electronic linkage of tax offices with enterprises, so as to control the issuance of invoices online and allow data cross-checking.

With respect to the reduction of expenditures, we will proceed as follows:  

1. We are scheduling the separation of the pension and healthcare services. In this way expenditure auditing will be more effective and citizens will enjoy better services.
   
   
2. We are proceeding to re-evaluate occupations classed as hazardous and unhealthy.
   
   
3. We are implementing stricter criteria for the provision of disability pensions.
   
   
4. We are promoting incentives that will allow workers to retain their employment.
   
   
5. We are also promoting measures to deal with the phenomenon of contribution evasion; these will be coupled with the claiming of tax and other debts owed to the government.
   
   
6. We are planning a series of structural interventions. More specifically, our aim is to facilitate young people entering the labour market by providing incentives and covering their social security contributions by the state. We are also reviewing additional interventions, in regions hit harder by unemployment.
   
   
7. We are moving ahead with the opening up of a series of 'closed' professions and services in the context of the relevant Community Directive. We are further planning new measures to enhance competition and deal with the rigidities constraining the markets.
   
   
8. We are proceeding to merge and abolish public sector bodies and organizations, with the aim of reducing their number. The first wave is already underway and the process will be sustained gradually. This is a policy that will substantially contribute to the saving of resources and will also render public service more flexible and effective.
   
   
9. By 2009 and 2010 respectively, all local authorities, social insurance organizations and hospitals will have a double-entry system installed and will implement International Accounting Standards (IAS), as the relevant procedures are already underway.
   
   
10. We are creating a Central Authority and an integrated Informational System in all ministries supervising the above-mentioned bodies and organizations, to maintain continuous and credible control over their expenses as well as over the operational plans these will be forced to submit.
    
    
11. We have established the imposition of penalties, including even the removal from office of non-elected members of administrative boards failing to implement the above measures.
    
    
12. Public sector payments will be made through a unitary Authority, which will also be responsible for monitoring and auditing. In this way we will have a clear picture on who is receiving what.
    
    
13. We are planning to formulate new public sector remuneration scales for new recruits, in order to manage and, in the long-term, rationalize the relevant expenditure and have civil servants that possess similar qualifications and equal seniority receiving the same pay, irrespective of the ministry they serve under.
    
    
14. We are restructuring the field of healthcare expenditure, which represents the major source of public deficit creation. Our aim is to audit the individual expenses of hospitals for medicine, consumable materials, and their procurements in general, by utilizing new technologies and modern methods.

All the above structural changes are today being systematically processed. We are working around the clock and will continue to do so throughout the summer, so that by late September we will be able to present a comprehensive and clear proposal. We need to be able to promote specific changes that will yield permanent benefits for the Greek economy in the coming years.  These reforms will contribute not only towards the goal of fiscal adjustment, but will generally enhance the development potential of our country.

The second keynote in the Government's plan is strengthening real economy: providing aid to the sectors and areas most affected by the crisis. From the inception of the financial crisis, we have taken and continue to adopt targeted measures, utilizing all the resources that our country's economic capabilities allow us to allocate.

• We have guaranteed the deposits of the Greek citizens.
  
  
• We have taken measures to protect borrowers.
  
  
• We have implemented the Plan for Enhancing Liquidity in the Economy, worth 28 bn. euros. 
  
  
• Through the Credit Guarantee Fund for Small and Very Small Enterprises (TEMPME) we are supporting 80,000 small and medium-sized businesses, providing them with low-interest rate loans worth 9.5 bn. euros.
  
  
• Through targeted measures, we are supporting tourism enterprises, the construction sector, automobile sales and in the near future freelance professionals.
  
  
• Through the 2007-2013 NSRF we are increasing the funds available for small and medium-sized enterprises.
  
  
• New actions are also underway for businesses in the context of our digital strategy.
  
  
• We are planning a new series of public works, worth 8 bn. euros, by 2013. Approximately 85% of these works concerns projects to be carried out in the provinces.

Ladies and Gentlemen,

The third keynote is support to the citizens who cannot manage on their own. In this context, we have carried out various actions, such as:

• The allocation of 450 million euros, through the Social Solidarity Fund, for actions like the provision of an extraordinary Social Solidarity Allowance to unemployed, low-pensioners and the handicapped.
  
  
• The provision of an extraordinary support allowance of up to 500 euros to low-wage workers and low-pensioners, for 2009.
  
  
• The implementation of a comprehensive programme, worth 3.2 bn. euros, funded through EU and national resources, for training, employment subsidy and social solidarity actions.

Ladies and Gentlemen,

None of the three keynotes of our policy can unfold in isolation from the other two. It will take coordinated and systematic effort in all directions. However difficult it may be for the Government, we do not have the luxury to settle for anything less, nor are we willing to do any such thing.

To exit the crisis we need a plan, responsible policies and national concord. Not generalities and far-fetched theories. This does not only pertain to the political parties and politicians, but also to our social partners.

It is most facile to criticize everything indiscriminately. What is more demanding is for everyone to stick to his or her area of responsibility and truly do whatever is needed. This is what the country really needs to move forward.

On our part, we have taken our decisions.

We have made a choice, as an administration and a responsible political force. Faced with the populism, irresponsible promises and facile platitudes, we respond with level-headedness and a realistic plan to steer the country through the crisis. A plan that, as developments unfold, is constantly improved, enhanced and expanded with new policy elements. A plan that is supplemented by a series of nationally indispensable, bold reforms.

What we have achieved in the last five years is not enough. The need for bold structural reforms becomes even more urgent. What we dared not do as a country before entering the EMU, we are forced to carry out now. What we had not the courage to carry out upon being accepted in the EMU, even when we perceived that our competitiveness deficit was becoming more acute, we are forced to implement in the two years that follow.

As a country we must, at long last, learn to rely more on the production of competitive services and products and much less on consumption and borrowing. As a country, if we want to aspire to and demand better living standards, we must redress our chronic structural shortcomings. In order to achieve such an ambitions national goal, we should finally find the courage to develop a competitive institutional framework in all fields. In the public sector; in the market; in education; in business; in research and technology.

The Karamanlis administration is determined to take the next step. To move ahead with bold reforms. We have clearly defined goals and specific aims. In cooperation with our partners in the European Union and by sustained efforts to combine, through dialogue, the various views expressed in the interior, we proceed with the necessary moves.

Ladies and Gentlemen,

The role of bilateral chambers is valuable in this direction. Organizations such as these combine factual experience of international cooperation with the knowledge of the Greek environment, the potential and shortcomings of Greek economy. Therefore we are counting on your contribution to the effort to usher in the new era after the crisis. The political will on the part of the government should be considered a datum. Now, it is upon all of us to join forces and work together in the right direction, in the interest of our country.

Thank you.