Central bank reports on growth, reforms

Greece’s central bank is expected to take a critical look at the country’s high 2003 growth rates in its interim monetary policy report expected today and repeat its call for structural reforms able to boost the country’s competitiveness, sources said. Senior sources at the Bank of Greece said the report will describe the country’s growth rates as unsustainable due to the one-off factors that drove growth, such as Olympic Games-related spending and the inflow of European Union funds. Greece’s statistics service estimates that Greece’s 160-billion-euro economy grew by 4.7 percent in 2003, one of the highest growth rates in the European Union. Sources say, however, that Bank of Greece Governor Nicholas Garganas, who is also a European Central Bank board member, will also comment on Greece’s public finances, which have been a major issue of debate since the conservative New Democracy party swept into power earlier this month, ending 11 years of socialist rule. Recently appointed government officials are saying that the 1.7 percent deficit estimate given by the outgoing Socialist government was inaccurate and that the figure is now seen much closer to 3 percent. The Finance Ministry is expected to prepare two reports on the course of the 2003 budget this week. Sources also said the central bank will repeat calls for the government to proceed with structural reforms and improve productivity. Economists have expressed their concern over Greece’s high inflation rate and the negative impact it is having on the country’s competitiveness. If strong growth rates are not accompanied by improved productivity, then this can translate into higher consumer prices and eroding competitiveness. Other areas of concern seen appearing on the monetary report include how the government will deliver on its pre-election promises without further hurting the country’s fiscal policy.

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