ECONOMY

Uphill fiscal battle till year-end

The Finance Ministry is facing an especially tough struggle to meet its fiscal targets in the last four months of the year. The revenue target is 23.3 billion euros, which is considered hard to achieve in the current conditions – even though it is a downward-revised figure – given the deepening recession and people?s inability to meet their obligations regarding taxes and social security contributions.

Nevertheless, after the 3 percent rise in public revenues in August year-on-year, the ministry is cautiously optimistic.

Deputy Finance Minister Pantelis Economou believes a positive trend in this respect ?will be strengthened to the degree that the recession is stemmed.? However, there have been no such signs to date.

Economou argues that tax evasion, the underground economy and smuggling are extremely widespread. ?Illegal practices undermine the economic recovery of our households and businesses, as well as the public sense of fairness. They are orchestrated by a rhetoric of noncompliance,? he says.

Meanwhile, Brussels is putting strong pressure on Greece to intensify efforts regarding reform and fiscal cuts, with a view to limiting the overshooting of the 2011 budget deficit target, which now seems certain, sources say.

?Unofficially the deficit is forecast at more than 9 percent of GDP, and will likely approach 10 percent if things stay as they are and there is no speedy reaction from Athens,? a high-ranking European Commission official said over the weekend. He added that the disbursement of the sixth installment of the international bailout loan to Greece has become something of a lever.

?According to the medium-term plan, the government has committed itself to adopting new measures every three months if performance is found to be diverging from the targets,? the official said.

The European Commission, the European Central Bank and the International Monetary Fund, which thrashed out the bailout plan and form the so-called troika, seem ready to respond positively to Greece?s request for an upward revision of the 2011 deficit target but refuse to accept that the recession alone is to blame for the overrun. The difference in estimates, which apparently caused the early departure of the troika representatives from Athens last Friday, amounts to about 1.5 billion euros.