ECONOMY

Promise of three-year stabilization program

Brussels – Economy and Finance Minister Giorgos Alogoskoufis assured his European colleagues that Greece will put its finances right thanks to a three-year stabilization program. Alogoskoufis spoke to his colleagues about Greece’s excessive budget deficit both during Monday night’s «Eurogroup» meeting of eurozone finance ministers and during yesterday’s meeting of EU finance ministers (Ecofin). During the meeting of ministers, the Commission announced the start of a process that will place Greece under supervision for exceeding the budget deficit limit – 3 percent of the country’s gross domestic product (GDP) – in 2003 and, quite likely, in 2004. New Finance Commissioner Joaquin Almunia, who replaced Pedro Solbes, now minister of finance in Spain’s Socialist government, said that the Commission will release a report on Greece’s finances next week. The report will repeat the conclusions of Eurostat, the EU’s statistics agency, that Greece’s 2003 budget deficit stands, on a temporary basis, at 3.2 percent of its GDP and that further upward revision is likely by September. The Commission will then issue a warning to Greece, requiring it to bring its budget deficit below 3 percent by 2005. The report and the Commission’s warning are expected to be approved at next month’s Ecofin meeting. As this is a first-time warning, it is up to Greece to decide what measures to adopt to bring the budget deficit under control. Alogoskoufis appears to have opted for the least painful approach. He acknowledged that this year as well, with spending on the Athens Olympics absorbing some 1.5 percent of Greece’s GDP, there will be an excessive deficit but said that this can be corrected in 2005. Speaking to reporters yesterday, he said he would not make specific promises to the Commission, adding that the warning did not worry him at all, since the new conservative government wants to put public finances right. The three-year stabilization program will likely be announced, along with the 2005 budget, this autumn. Alogoskoufis said the main effort to curtail excess spending will be through reform of primary spending in the public sector. Then, the government wants to cut deficits by spurring economic growth. To this end, it will emphasize the development of sectors such as tourism, industry and several services sectors.