ECONOMY

Ecofin to repeat warnings about Greek economy

The Council of European Finance Ministers (Ecofin) is expected to endorse Greece’s economic forecasts for the period 2002-2006 on Tuesday, but will repeat the European Commission’s warnings about reducing debt, spending cuts and a serious reform of the social security system. When the Commission met on January 8 to consider the Greek forecasts – submitted each year as mandated by the EU’s Stability and Growth Pact – Finance Commissioner Pedro Solbes remarked that the Greek economy had gone past the alert stage and is now in need of immediate measures. «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,» the Commission remarked, adding that «further deep reforms are required without delay to the pension system.» Greece’s debt, equal to 105.8 percent of the country’s gross domestic product at the end of 2002, is now the second highest among EU members, after Italy’s 110.3 percent. Belgium, once by far the most indebted country, has now cut its debt below Greece’s. According to the government’s forecasts, considered optimistic by the Commission, total debt will fall to 100.2 percent of GDP in 2003, 96.1 percent in 2004, 92.1 percent in 2005, and 87.9 percent in 2006. Last year’s budget deficit is estimated at 1.1 percent of GDP. Initially a 0.8-percent surplus, it was revised after Eurostat, the EU’s statistics agency, obliged Greece to include convertible bond issues and securitization operations into its budget and its total debt. According to the government’s projections, the deficit will decrease to 0.9 percent of GDP in 2003 and 0.4 percent in 2004. A modest 0.2-percent surplus, the first in almost four decades, will be achieved in 2005, rising to 0.6 percent of GDP in 2006. GDP growth, expected at 3.8 percent this year – the highest among advanced economies, globally, not just in the EU – will stay the same in 2003, rise slightly to 4 percent in 2004 and decline slightly in 2005 and 2006, to 3.7 and 3.6 percent, respectively. Finally, the average annual inflation rate – measured by the European Central Bank’s Harmonized Index of Consumer Prices – is expected to remain unchanged in 2003 from 2002 levels (3.9 percent), and decline slightly thereafter – to 3.2 percent in 2004, 3 percent in 2005 and 2.9 percent in 2006. All these figures will be well above the eurozone average, which is expected to dip below 2 percent next year.