ECONOMY

No change on debt, creating jobs

The government may have revised its growth targets for this year and next but it intends to stick closely to debt reduction goals set out in the stability and growth program, Economy and Finance Minister Nikos Christodoulakis stressed yesterday. Bringing down public debt will continue to be a top priority for the government, he told reporters yesterday. He said that Greece, together with Belgium and Italy, has the dubious distinction of having the highest level of public debt in the eurozone. According to the 2002 draft budget unveiled by former National Economy Minister Yiannos Papantoniou, the debt to gross domestic product (GDP) ratio is projected to fall to 95.2 percent in 2002 from 98.9 percent this year. Lowering state debt is expected to give a substantial boost to the general government balance. Schroder Salomon Smith Barney economist Miranda Xafa in a recent research note said that the decline in interest payments accounts for the entire improvement in the general government position. The 2002 draft budget foresees debt servicing costs falling to 6.4 percent of GDP next year from 7.4 percent this year. Christodoulakis said the debt reduction goals will not be affected by the lower GDP growth rates, estimated at 4.1 percent for this year and 3.8 percent for 2002. The minister’s more realistic assessments contrasted with his predecessor’s projections of 4.6- percent growth this year and next under the optimistic scenario versus 4.5 percent in 2001 and 4.0 percent in 2002 under the worst case scenario. He said that lower revenues will be offset by cuts in consumer expenditure. The Organization for Economic Cooperation and Development, a Paris-based think tank, however said in a preliminary note last month that Greece is more likely for growth to hit 3.7 percent this year, rising to 4.0 percent in 2002. Christodoulakis said that Third Community Support Framework funds and the ongoing privatization program will play a critical role in ensuring continual strong growth. As such, the government aims to speed up projects backed by European Union structural funds while making sure that the monies will be fully absorbed. The minister said that tax measures approved by the Cabinet as part of the current efforts to reform the tax system could be introduced next year. Though he did not disclose details, he has repeatedly stressed the need for competitiveness-enhancing measures since his appointment to the top economic post. Competitiveness-boosting proposals are expected to include incentives for company mergers and lower corporate tax rates. The Cabinet is due to meet Thursday to discuss the tax proposals. Economic policy, however, will not focus only on companies, Christodoulakis stressed. Creating jobs and lowering the unemployment rate will form the center plank of the government’s economic policy, he pointed out.