Garganas defends fiscal revision, but notes 2003 progress

Bank of Greece Governor Nicholas Garganas yesterday called for urgent measures to contain the fiscal deficit to below the European Union’s prescribed ceiling of 3 percent, but disagreed with the main opposition PASOK party’s claim that the Greek economy had been placed «under supervision» by the European Commission due to the government’s revision of the deficit for 2003 from 1.7 percent of gross domestic product (GDP) to 3.2 percent. «Our country’s position has not changed. The fact that we have exceeded 3 percent is not the end of the world, on the condition that we adopt measures in good time. I do not think that the country is under supervision. The claim is somewhat exaggerated. There are five other countries in the same position as us, but it is up to us to adopt the measures that will stop this process,» he told the parliamentary economic affairs committee during a presentation of the central bank’s report on the economy. Garganas defended the revision of the fiscal deficit and said he had full confidence in Eurostat, which had provisionally confirmed the revised figures. Further, he cautioned that full confirmation was not possible as there is an «underestimation» of defense spending and a «lack of reliable data» regarding the surplus of social security organizations. Nevertheless, the governor described 2003 fiscal and economic data in more favorable colors than in previous years. He said there was a reduction in government borrowing from banks, a fall in the current account deficit (which remained high, nevertheless), a slowdown in the annual rate of credit expansion to households (but a still faster rise in consumer credit), a further fall in interest rates (but still above the eurozone’s), and drops in the rate of unemployment among the young and in the inflation differential from the eurozone average. Negative developments were the rise in unit labor costs and the continuing inflationary pressures which are expected to further grow due to rising oil prices and the Olympic Games. Former Economy Minister Nikos Christodoulakis defended his government’s record, arguing that the revision of the deficit was only the result of accounting reclassification. He noted that 2003 was a year of impressive rises in exports (8.5 percent) and in currency inflows from shipping and that competitiveness had improved. He said labor costs had fallen in relation to inflation. Communist Party Deputy Angelos Tzekis disputed the central bank data on labor costs, saying they had fallen, therefore profits had increased.

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