Our country is moving towards national elections choose the leadership of a country to lead it, hopefully with security, prudence and planning, into a virtuous cycle of development, social cohesion and prosperity in an environment of international peace, secure borders, institutional stability and democracy.

Accordingly, the political dialogue should not take place in fruitless confrontations, but should be focused on the central stake of the elections, which, in my opinion, is the economy and its prospects. We are called to choose leadership and a blueprint for economic recovery and social cohesion in terms of membership. European Union and an open market economy. The plan must convince international markets, productive forces and society as a whole of its credibility, its development orientation, its social cohesion and fairness, its creative and institutional stability, its commitment to reform, and its business-friendliness.

Greek economic policy making in the coming years will take place in a less favorable international environment. Russo-Ukrainian crisis, rising tensions between the US and China, uncertainty in the banking sector, a shift in economic dynamics from the West to the Far East and the gradual transformation of Europe into a continent of stagnation, high inflation, rising interest rates and a slowdown in economic growth worldwide , unprecedented economic and social upheavals caused by the fourth industrial revolution, caused by the rapid spread of digital technologies, artificial intelligence, robotics and automation, increasing economic and social inequality, fueling political extremism, nationalism and social conflicts, as well as the forced transition of energy to renewable and environmentally friendly energy sources to avoid environmental catastrophe constitute a complex, dynamically changing economic and social environment in which the next government is called upon to pursue a dynamic economic development policy and social cohesion.

Over the past few years, Greece has recorded a number of positive developments in the economy, despite the strong negative effects of the COVID-19 pandemic and the Russian-Ukrainian crisis, which forced the authorities to implement serious monetary easing measures and fiscal support at the international level, policies that gradually canceled and completely changed.

In this context, the government has rapidly advanced the digitalization of the broader public sector, made the economy particularly friendly and attractive to foreign and domestic investment, a high level of banking liquidity has been achieved and the stability of the banking system has been restored, and the direct tax burden has been reduced. significantly reduced, especially those with a strong sign of development, an ambitious program to support investment and digital and energy transformation has been implemented under Greece 2.0 funded by European Development Fund and Sustainability, a series of important privatizations have taken place, the country’s export potential has improved significantly, and the recovery of the Greek economy over the past two years has outpaced the EU-27, with the tourism industry making a significant contribution to this process.

But the new government will have to face a number of critical and difficult challenges in the new four-year period, mainly due to the commitment to a tighter fiscal policy with limited fiscal space, an upward trend in interest rates and limited liquidity, accuracy and inflation, a growing demographic problem and labor shortages, delays in implementing critical reforms, addressing growing social inequalities, large investment gaps and low productivity, high levels of non-performing loans, and reaching investment grade. I will dwell on the main issues in more detail.

We are moving towards tighter fiscal policy by submitting to the European Commission an updated Stability Pact for the period 2023-2026, which will also include mandatory fiscal targets. A return to the primary fiscal surplus, a permanent reduction in public debt as a percentage of GDP, and limited room for fiscal policy to support an economy similar to those of the past three years are envisaged. The government will be forced to make critical and unpleasant choices in spending allocation and fiscal policy, but the development aspect of this choice cannot be overlooked.

The government’s tools to fight inflation and raise interest rates are limited because liquidity, monetary policy and interest rates are largely determined by the European Central Bank. But there is significant room to improve the accuracy and high cost of inputs through measures to increase competition and overcome oligopolistic situations in the market and in import trade, to strengthen fiscal stability and achieve investment grade in order to reduce the escalation of the risk premium to the cost of borrowing and implement a bold long-term program of public and predominantly private investment to significantly increase the supply of goods and services.

The implementation of a number of critical reforms for the country’s development path and institutional effectiveness is being delayed and faces obstacles and audacity. Directions Justice, healthcare, public administration, DECO, the agricultural sector, the creation of size-competitive export-oriented enterprises, strengthening the independence of supervisory and regulatory bodies and transparency, accountability and corporate governance in the eyes of the general public in the sector, expanding the tax base and tax fairness, as well as the transition to a new era of digitalization and a green economy should be the main pillars of the new government’s reform agenda.

The country is also facing a very serious demographic problem and a shortage of labor, which in the medium term undermines the country’s development potential, increases the cost of labor, and raises a number of serious national problems.

The population is declining every year, workers who have gone abroad return very rarely despite the incentives offered by the government, and the entry of immigrants who want to stay in Greece shows no dynamism. The government seems to be underestimating the importance and priority of the problem, which requires a comprehensive plan, very smooth innovative comprehensive policies and strong incentives.

However, perhaps the biggest test for the next government is the investment backlog. The decade-long Greek crisis has left us with an investment deficit of 100 billion euros. Despite a significant improvement in the economic environment in recent years and a record inflow of foreign capital (7.2 billion euros in 2022), the establishment of fixed investment as a critical development parameter remains sluggish. It increased by just 13.7% in 2022, compared to a 22.7% increase in the European Union. We need to achieve fixed investment growth rates well above 20% per annum and significantly improve national productivity and international competitiveness over the years. It is worrisome that the current account deficit has recently reached 9.7% of GDP, confirming poor performance.

Finally, countries that have achieved consistently high growth rates have two common characteristics in which we are lagging behind: a competitive and modern education system, recognized universities with research activities, and a strong technical education that is combined with the changing needs of the economy and technological transformation. , while spending significant amounts on research and innovation (R&D), approaching 4%-5% of GDP, while ours is below 2%. Both of these areas should become a priority for the policy of the new government, which will be formed following the elections.

Mr. Nikos Karamouzis is Chairman of SMEremediumCap and Grant Thornton, Greece.