The debt level is still too high

Once again, the government will fail to reach its target on the national debt. Even though the data on the draft budget presented yesterday by Economy and Finance Minister Nikos Christodoulakis is widely considered as optimistic, it nonetheless shows that public debt will drop to 101.7 percent of Greece’s gross domestic product (GDP) at the end of 2003 – and not to 100.2 percent, as government forecasts and pledges to the European Union had led us to believe. According to the same data, national debt will drop to 98.5 percent of GDP at the end of 2004, a goal that should have been reached in 2001. In the meantime, however, the EU’s statistics agency, Eurostat, put the lid on the government’s efforts to underestimate debt by obliging it to account for items such as share-exchangeable certificates and other instruments used to finance the repayment of debt. As a result, the 2001 debt was closer to 108 percent of GDP, dropping to 105.5 percent in 2002. Even under the government’s scenario, the debt at the end of 2004 will still be a crushing 163.9 billion euros. And servicing it is not helped by Greece’s loans to finance its armaments programs. To pay off such loans, Greece must pay 2.3 billion euros in 2004. For 2003, the budget has appropriated 1.2 billion euros for the purpose, but this figure is likely to be exceeded by 80 percent, to 2.1 billion euros. The government has entered into a secret agreement with three banks to defer some payments for three years.

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