Elections force Greek Socialists to focus on economic stagnation

By , Special to The Christian Science Monitor

The two-year-old Socialist government in Greece has made only cosmetic changes in the structure of the nation's economy. That could change in 1984, however, as Prime Minister Andreas Papandreou turns his attention from foreign policy to the economy.

Once an economics professor in the United States, Mr. Papandreou limited his initial domestic moves to social and labor legislation. But the economy has continued on a downward slope - even though the Socialists inherited an economy on the decline. The Socialists face elections in 1984 and 1985 which will be determined by the state of the economy, according to many government supporters and critics alike.

Inflation is galloping at 20 percent, unemployment is near 8 percent, industrial production has fallen 5 percent this year, and growth is zero.

Recommended: Default

The balance-of-payments deficit will exceed $2 billion this year and is expected to rise only 1 to 1.4 percent next year. The bureaucracy remains as sprawling and inefficient as ever. Perhaps worst of all, business confidence is at an all-time low.

In large part, however, the lack of substantial change in the domestic economy can be explained by the Greek and world economic crisis inherited by the Socialists from the conservative New Democracy opposition, which governed Greece from 1974 until the Papandreou victory in October 1981.

Former Foreign Minister Konstantinos Mitsotakis was once quoted as admitting, ''It is true that we emptied the Treasury to avoid an electoral defeat.'' Thus, after an initial period of economic largesse, Papandreou was forced to adopt an austere economic policy.

The controversial takeover - through government control of banks - of several large private firms either accused of fraud or severely in debt and close to bankruptcy is considered minor in the context of a Greek public sector that already accounts for half of economic activity and that is essentially the creation of the previous conservative governments.

Still, no immediate foreign-policy victory is in sight to distract the attention of the Greek people from economic problems. Elections for the European Parliament - which the conservative opposition has promoted as a referendum on the government's performance and a dry run for national parliamentary elections scheduled for October 1985 - are less than six months away.

Papandreou must therefore use his considerable talent for self-promotion to ensure that he and his party do not suffer from the public's frustration over the economy.

''The economy cannot be turned around in five months,'' affirmed a private businessman, ''and under present circumstances worldwide, maybe it cannot be done at all in such a small country. So he (Papandreou) must be content with limiting the damage.''

Observers and government sources say Papandreou will seek to blame the country's economic problems on his predecessors, the international economic situation, American interest rates, and the painful process of joining the European Community, which has had a negative effect on the Greek balance of payments. He will also say that his government has managed austerity with a more even hand than would his conservative opposition.

Meanwhile, on the practical side, the government has adopted a looser incomes policy for the 1984 budget, granting wage increases of up to 6 percent (after projected inflation) to wage earners in the public sector. The opposition calls it an election-year giveaway.

There has also been talk of reorganizing and consolidating some ministries, steps that might eliminate some red tape, but would at any rate create the impression that the government was doing something. Greece is also seeking alterations in its terms of entry to the European Community (which it joined two years ago) to make better use of its status as the community's least-developed member.

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