Unveiling of bold targets for economy

High growth, low deficit forecast

Greece will try again today to convince EU officials that it is capable of bringing its economy into line with other member states when the government presents its revised stability and growth program and, according to a copy seen by Kathimerini, it forecasts a drop in the public deficit to just below the eurozone limit by the end of 2006.

The government, which has been given until the end of next year to reduce its deficit to below 3 percent of GDP, predicts that it will fall to 3.5 percent by the end of this year, 2.8 percent by 2006 and 2.2 percent the year after. The deficit reached 6.1 percent of GDP in 2004, according to figures released on Friday by the European Commission’s statistics agency, Eurostat. Greece had the highest deficit among all 25 EU member states.

If Economy and Finance Minister Giorgos Alogoskoufis is successful in guiding the country toward the target laid out in the program, which will be submitted to the Commission today, it will signal the end of a period during which the EU is officially monitoring Greece’s deficit.

At the end of October, the Commission indicated that Greece needed to adopt additional measures to bring its deficit into line with eurozone rules, called plans to reduce the deficit to 2.8 percent of GDP by the end of 2005 “rather optimistic” and considered a projection of 3.6 percent as “more realistic.”

According to the adjusted stability and growth program seen by Kathimerini, it seems the government has taken these comments on board. However, the projections for Greece’s growth rate may prove slightly more contentious.

Alogoskoufis is projecting that Greek GDP will grow by 3.9 percent this year, 4 percent in 2006 and 4.2 percent in 2007. However, earlier this month, the EU Monetary Affairs Commissioner Joaquin Almunia warned that Greece was unlikely to achieve its growth forecasts this year and predicted that the the country’s GDP is likely to grow by about 3 percent. He also said that unless measures were taken, Greece’s budget deficit for 2005 would rise to close to 4 percent of GDP.

The stability and growth program also foresees a 1.6 percent reduction in the unemployment rate, to 8.9 percent by the end of 2007. Although the plan will be submitted today, it will not be evaluated by the Commission until April.