As inflationary pressures grow, with high prices affecting households and development prospects for the post-Olympics period fading, the Greek economy is gradually entering a difficult phase. At the same time, the government will have to deal with strong EU pressure to bring public finances in order.

At the Ecofin meeting in Brussels on Tuesday, National Economy and Finance Minister Giorgos Alogoskoufis is expecting strong pressure mainly because of the high public debt. He is already preparing — in addition to the 2005 budget proposal — a three-year program aimed at reining in deficits to under 3 percent. Reliable sources say the government has ruled out shock policies such as Portugal’s and is aiming at a gradual adjustment of the economy. This will be based on curbing spending, limiting hirings and keeping pay increases of civil servants at the level of inflation.

The situation, overall, is said to be difficult, as the public finances have broken out of their limits and society cannot accept limits on revenues, especially as prices soar. That is why emphasis will be placed on supporting economic activity — through privatization and freeing markets — in the hope that this will attract new investments.