ECONOMY

Finance Ministry insists 2003 deficit will be close to target

The Economy and Finance Ministry said yesterday it does not expect to miss this year’s 0.9 percent budget deficit target by a «significant» amount, dismissing an earlier estimate from a senior ministry source of a 1.7 percent shortfall. A statement issued by the Finance Ministry said: «Based on preliminary available state budget data as well as budget data from other general government bodies, the ministry estimates that (this year’s) budget deficit target will be met, without a significant divergence, as was the case in previous years.» Earlier yesterday a Finance Ministry source told Reuters this year’s budget deficit could be revised up to 1.7 percent of gross domestic product (GDP), the result of increased spending related to bad weather earlier in the year that caused damage to infrastructure and crops. Economy and Finance Minister Nikos Christodoulakis has said this year’s budget would be revised slightly higher. Earlier in the week, he projected next year’s shortfall at 1 percent of GDP, above the 0.4 percent goal set in Greece’s stability program submitted to Brussels late last year. «The deficit is going to be well within the accepted limits,» Christodoulakis told reporters in Stresa, Italy where EU finance ministers are meeting, hoping to defuse a political crisis sparked by France’s refusal to respect budget deficit limits. Christodoulakis said the government was still working on the 2004 budget and declined to comment further. Despite Christodoulakis’s upbeat assessment, he and his advisers are well aware that, in the 2003 budget, excess spending has already reached 1.5 billion euros and that things are going to get worse until the end of the year. There is pressure for more spending on Olympics-related infrastructure projects, funded through the Public Investment Program, but this is not the only source of excessive spending. More than initially forecast has been spent on civil servants’ wages, social security benefits and healthcare, as well as operating costs and other items. There have also been difficulties in raising revenue to pay interest on the country’s enormous public debt, which exceeds 105 percent of the gross domestic product (GDP). The main budget’s reserves of 300 million euros had already been exhausted early in the year, long before the damage from the earthquake on the island of Lefkada in mid-August necessitated considerable emergency aid. The last official data shows that the budget deficit in the first seven months of the year had risen 83.4 percent compared to the same period last year. At 7.2 billion euros, it was higher than the expected deficit of 5.3 billion euros. However, the government insists that things will sort themselves out in the remaining months and that (almost) all the excess deficit will disappear. A similar situation had threatened the 2002 budget. In the end, the government met its target by cutting spending on the Public Investment Program from 8.9 billion euros to 7.1 billion. Will it do something similar this year? Another cause for worry is the fact that Christodoulakis earlier this week raised the limit of loan guarantees to public bodies from 550 million to 1.8 billion euros. The decision was published in the Official Journal of Monday, September 8. Earlier this year, he had promised, amid much fanfare, to cut the limit to half. (Kathimerini/Reuters)