ECONOMY

Greece’s growth on target, war in Iraq not a damper

Greece is on track to reach its growth target this year notwithstanding the possibility of a war in Iraq, Economy and Finance Minister Nikos Christodoulakis said yesterday. «There is no question of the Greek or European economy suffering long-term effects [from a war in Iraq],» he stressed. The government is projecting economic growth at 3.8 percent, unchanged from the previous year, against an anemic 1.5 percent for the eurozone. The reassurance came a day after both Prime Minister Costas Simitis and industrialists said the possibility of US-led military action against Iraq was already making its impact on the country’s economy felt. Simitis said the tension was dragging down stock markets and forcing businesses to put investment spending on hold. In Athens, the stock market posted its third consecutive decline yesterday. Strong domestic demand is expected to cushion Greece from the effects of a war in Iraq, Christodoulakis said. Investments related to the 2004 Olympic Games and projects financed by community funds are seen as the engine of growth for the next few years. «Our growth target [of 3.8 percent] is totally realistic,» the minister said. Christodoulakis also brushed aside concerns that the rising euro could clip growth and bring on other problems. The single currency yesterday hovered at three-year highs, rising to $1.0857 late yesterday in New York. He said the strong euro was a vote of «confidence in Europe’s economy.» Reactions to the euro’s rally among European leaders have varied, however, with some welcoming a strong currency and others being more cautious. European Monetary Affairs Commissioner Pedro Solbes on Tuesday voiced concerns over the euro’s extreme volatility, echoing European Central Bank council member Ernst Welteke’s worries over a rapid fall in the dollar versus the euro. ECB Vice President Lucas Papademos told French newspaper Le Monde earlier this week that «a strong euro is in the interest of Europe.» Not only would it ward off inflationary pressures, it would have little impact on exports and growth and at the same time hasten the implementation of structural reforms. Another ECB council member, Matti Vanhala, also reiterated the Central Bank’s optimism over the strong euro, saying that currency markets have remained orderly to date. On the Third Community Support Framework (CSFIII), Christodoulakis said Greece is in no danger of losing funds. «Projects are progressing well. There is absolutely no risk of loss of funds from CSFIII,» he said. Projects under the second tranche of structural funding have already being evaluated and Brussels is due to release the funds, estimated at about 1.5 billion euros, by the end of March.