Macroeconomic Policy? Not Everyone Has to Understand It

Branko Grčić, in a conversation with Mislav Bago for Nova TV, commented on, among other things, why there is a lack of private investments and whether citizens can spend more as they become more indebted, and he also spoke about the decline of the economy.

“Vice President, it’s negative. Did you expect it or are you disappointed by another decline?
Well, I must admit that I expected somewhere around minus 1 percent for the first quarter.
Does that mean we are still declining, slowing down the decline, or is recovery beginning?”
“We are slowing down the decline, but I hope that this is the beginning of a more serious recovery.”

“Does that mean we have hit rock bottom?”
Well, I hope so, I want to believe that. And as many as 7 European countries have a lower rate in the first quarter than Croatia. This means that Europe is still going further into recession.”

“So we are bad, but there have been worse than us in Europe?
Yes.”

“Then this was supposed to be the worst quarter in 2013?
Yes. We started with a slightly smaller minus, and I hope that we will finish the year, in the last quarters, with a plus.”

“Personal consumption is still the biggest problem. However, I have a feeling that there is a dilemma in society about whether we should grow through personal consumption or through industry?
Well, you see, that is the problem, people often forget that we are over-indebted in all segments and in such conditions you actually have to bring the whole system into a new balance.”

“You need to reduce debt?
In a way, there is a process of citizens reducing their debt to banks.”

“Does that mean that now, if we have 100 kuna, we will spend 100 kuna, because maybe 5 years ago we spent 150 kuna?
Yes. We will now spend approximately 120 kuna, which means we will still live on credit, but I hope that this debt will be smaller, so the burden and interest on that debt will also be less.”

“So we need to spend within our means?
Exactly, just what is within our own capabilities.”

“It seems to me that you in the government, in this economic part, are bothered when economists and experts constantly talk about ‘consumption consumption consumption’, while you actually want to discuss production?
Well, yes. Investments are the key to recovery. Unfortunately, the private sector has not yet entered a new investment cycle.”

“Are they afraid, do they lack money, or is it something else?
Well, I would say all of that together, all of it slightly affects the still pessimistic investors.”

“As a vice president, are you aware that the vast majority of citizens do not understand, do not know, cannot grasp what you are actually doing?
Yes, well I think that is clear. Macroeconomic policy is something that is quite sophisticated and not everyone has to understand it, and citizens do not have to think much about it.”

“They have no sense that anything is being done. Do you think ordinary people see that you are working or do they think that nothing is happening?
Well, you see, citizens can only see that through the recovery of their standard of living. Or those who do not have a job getting a job and there being many new jobs.”

“And that will not happen this year?
That will happen relatively slowly, and that is how it is, I am sure that in the second part of our mandate we will achieve very visible effects.”

“We will no longer be in the red?
Well, I hope so, yes.”

“And how do you think anyone will believe you or support you for reforms and all the unpopular things that need to be cleaned up and put in order, when the least number of citizens at this moment, according to our research, believe in government policy at all?
Yes, that is expected.”

“For whom will you even implement anything?
Given the depth of the problems we are facing, that is expected.
Do you think there will be political courage to continue with reforms or will we be going in circles?
This is a race, this is a marathon, this is not a 100-meter dash, this is a grueling, difficult race in which all psychophysical abilities are tested, as well as all members of this government and this government as a whole.”

“And the most enduring will reach the end?
Exactly, and we will persist in this, in our strategy, which will certainly yield results.”

“The marathon lasts a long time, do you think citizens will be able to wait?
This marathon lasts 4 years. After 4 years, citizens will express whether we won the marathon or remained at the back.”