ECONOMY

Brussels OKs growth goal, doubts debt, budget targets

The European Commission said yesterday that Greece should be able to achieve above-average growth targets set out for the next three years but cast doubts on its ability to meet budget and debt goals. Assessing the updated Greek stability and growth program covering the period 2002-2006, the EU’s executive arm said Greece’s assumption of 3.8 percent annual GDP growth is «attainable and close to the Commission’s autumn 2001 forecasts until 2004.» The Greek economic plan projects the economy as expanding by 3.8 percent this year, rising to 4 percent next year, slowing down to 3.7 percent in 2005 and 3.6 percent in 2006. In comparison, growth in the eurozone this year is estimated at about 1.6 percent. Greece’s robust growth is expected to be underpinned by the high level of public and private investments related to the 2004 Olympic Games and the inflow of EU community funds until 2006. The Commission, however, questioned the feasibility of budget and debt targets, criticizing the slow pace in both areas especially at a time of above-average economic growth. «These budgetary developments, in particular the slow pace of reduction in the government debt ratio, in a period when the Greek economy has been growing at high rates, is a matter of serious concern,» it stressed. Not only that, but Greece appears to have postponed the bulk of the adjustment process to after 2003. Greece had originally announced a budget surplus in 2001 only to see the achievement go up in smoke after Eurostat tightened its accounting rules. The reclassification of complex financial operations by the EU’s statistical agency jacked up last year’s budget deficit to 3.5 percent from a 1.1 percent estimate, and pumped debt up to 105.5 percent, Finance Minister Nikos Christodoulakis said yesterday. Convertible bond issues and securitization operations transacted in 2000 and 2001 were included in the debt. The updated stability and growth pact foresees a balanced budget from 2005 onward. It also estimates public debt falling to 100 percent of GDP this year and to 87.9 percent in 2006. Based on its parameters, Greece should still see a budget deficit of 0.6 percent of GDP to 2006, the Commission said. It called for the debt reduction process to be speeded up as the aging population is likely to create budget imbalances in the future. Greece’s inability to rein in expenditures and the government’s superficial social security reforms announced last year also came in for criticism. «Further deep reforms are required without delay to the pension system,» the Commission said, to avoid an unsustainable increase in public spending for pensions. Structural reforms should be implemented with more determination to improve market efficiency in the labor, product and services markets and to boost market competitiveness.