Gov’t still confident on fiscal targets

Contingency plan is being examined in case of revenue shortfalls or expenditure overruns

By Vassilis Ziras - Kathimerini

The government insists that it will meet its fiscal target of reducing the budget deficit to 1.6 percent of the gross domestic product (GDP), but it is also looking into a contingency plan if revenues and spending fall off target and pressures from Brussels increase.

The European Commission’s spring forecasts for the reduction of the deficit to 2 percent this year were not followed by recommendations for new measures, as the Commission is happy with the pledge by the economy minister of the precise execution of the budget, which it had originally considered ambitious, not to mention the difficulties posed by the current negative global downturn and reservations by Eurostat regarding the fiscal figures Greece submits.

At the next meeting of the European Union’s economy and finance ministers (Ecofin), Minister Giorgos Alogoskoufis will reiterate that pledge, followed by reassurance that he will immediately promote a bill to set the finances of social security funds, hospitals and local authorities in order, so as to quell Eurostat’s reservations.

Economy Ministry officials suggest that no additional measures will be required, but acknowledge that they will not be able to tell before July whether the government has reached its target, as it is only then that the ministry will be able to calculate with accuracy the revenues expected from the single property tax. Only then will the government have a clearer picture of the course of the budget for 2008.

Until July, as far as revenues are concerned, the ministry’s efforts will only focus on beating tax evasion. Greater benefits for state coffers are expected from the single fuel value-added tax (VAT), due to the rise in fuel prices. The prospect of a rise in VAT has been practically ruled out for this year, as it would strengthen inflation – the Greek economy’s biggest woe at present.