ECONOMY

Alogoskoufis says he prefers a soft approach to deficits

Economy and Finance Minister Giorgos Alogoskoufis told reporters yesterday that measures to contain the budget deficit will be announced in November with an emphasis on spending cuts. «Our efforts to limit the deficit will focus more on reducing government spending. We’ve already had a first discussion on the measures with the Commission,» the minister said without giving more details. «We are free to decide on the measures we will take; we have the flexibility to take steps to shrink the deficit by 1 percent of GDP within two years as it suits us best,» he said. The government would prefer to make small cuts in several budget items rather than be obliged to make deep cuts in one important program. It would like the measures not to be exceedingly unpopular. However, its own audit of state finances leaves open the possibility that the 2003 budget deficit may be found to be even higher than the 3.2 percent of GDP agreed to so far with the European Union. Signs are also accumulating that the 2004 budget may exceed the 3 percent of GDP limit posed by the EU’s Stability and Growth Pact. The General Accounting Office (GAO) announced yesterday that the budget deficit rose 8.2 percent year-on-year in the first five months of 2004 as spending grew faster than revenues. The figures showed it will be difficult for Greece to contain this year’s deficit below the European Union’s cap of 3 percent of gross domestic product (GDP) after breaching it in 2003. The GAO said budget revenues grew 7.7 percent year-on-year to 16.5 billion euros in the five-month period, while spending rose 10.4 percent to 20.3 billion. The budget deficit hit 6.55 billion. Interest payments to service the country’s public debt rose 1.1 percent to 5.8 billion euros. Overruns in infrastructure and security costs related to the Athens Olympic Games this summer have been a main reason for increased government spending, according to a government report in May. Greece’s public debt, one of the highest in the eurozone, is expected to hit 101.8 percent of GDP in 2004. Alogoskoufis accused the previous socialist government of being responsible for the high deficits. He specifically accused his predecessor Nikos Christodoulakis of creating a 2004 budget he knew would be impossible to implement. He has refused to submit any revised budget so far, however.