2004 budget targets rise in investment, social spending

The government yesterday stuck to its optimistic outlook for the Greek economy in coming years, tabling a 2004 budget that foresees a strong rise in investment and a further convergence of per capital income with the European Union average. «This is the result of efforts lasting many years which overturns the currently fashionable tendency of regarding the Olympic Games as an expiry date for Greek economic growth,» Economy and Finance Minister Nikos Christodoulakis told a Cabinet meeting which approved the final document. The budget, which incorporates the basic figures from Greece’s Growth and Stability Program for the 2004-2006 period which is to be submitted to Brussels before the end of the month, projects a 7 percent rise in investment in constant prices (5.7 percent in 2005 and 5.5 percent in 2006) and a 3.4 percent rise in real incomes (above inflation), against an EU average of 0.4 percent. This is estimated to bring the Greek average wage to 84 percent of the EU average. Christodoulakis said the government had opted for a moderate fiscal policy in the coming year in order to meet special requirements of the Greek economy, particularly Olympic and public projects, as well as maintain its social policies. The budget’s special Public Investment Program (PIP), places emphasis on projects subsidized by the EU’s Third Community Support Framework (CSFIII). Of PIP’s total of 9,250 million euros, 5,270 million will go toward CSFIII investments, and 1,800 million to finance projects of «Olympic preparations and national priority.» The energy sector is earmarked to absorb 93.5 percent more in PIP funds next year, and culture and public administration 54.2 and 64.8 percent more than in 2003. Greece is projected to receive a net 5,386 million euros from the EU budget, against 4,241 million in 2003. The economy is seen growing at a rate of 4.2 percent. The regular budget (including PIP) projects a 6.2 percent increase in revenues to 41,420 million euros and a 6.9 percent rise in expenses to 42,550 million. The general government deficit (after counting in a surplus from public organizations) is forecast at 1.2 percent of gross domestic product (GDP), against 1.4 for 2003. Christodoulakis said he believed the deficit could be practically eliminated in 2006. Public debt is foreseen falling to 98.5 percent of GDP from 101.7 percent this year, while interest payments are forecast to recede to 22 percent of budget revenues, against 23 percent this year and 37 percent in 1998. Revenue from direct taxes is projected to rise by 6 percent, taxes on property by 6.4 percent and indirect taxes 7.7 percent. However, the overall tax yield is projected to go down to 25.2 percent of GDP from 25.6 percent this year. Unemployment is forecast to drop to about 8 percent from an expected average of 9 percent this year. The budget seeks to reinforce the government’s social commitments. Social security grants will go up 12.7 percent, with the farmers’ pension fund receiving a 16.6 percent rise. Christodoulakis said wage earners and pensioners will benefit from a total tax reduction of 500 million euros, while about 1.1 million low-income taxpayers will be exempted from the obligation to submit annual income declarations. Public utilities will freeze rates at least for the first half of 2004 in order to contain inflation, which is seen falling below this year’s projected 3.5 percent. Christodoulakis said the government is aiming at almost halving the country’s defense spending by 2008, which is presently proportionately more than double the eurozone average.