ECONOMY

Ecofin imposes savings of 1.5 bln euros to Greece by end-2005

Brussels – The Council of European Finance Ministers (Ecofin) gave Greece until November 5 to work out, apply, and inform Brussels of measures that will lead to public spending savings of at least 1.5 billion euros by the end of 2005. Ecofin, which met on Monday in the Belgian capital, approved the excessive deficit procedure against Greece, which translates into this «ultimatum.» The decision was taken without much discussion: the Dutch presidency accused Athens of violating the EU Stability Pact and Greek Economy and Finance Minister Giorgos Alogoskoufis pleaded. His German counterpart, Hans Eichel, did however note that «we congratulated Mr Alogoskoufis on the success of the Greek national team (at the Euro 2004 soccer championship) and we then moved on to the business at hand.» Greece must decrease its public deficit, which in 2003 amounted to at least 3.2 percent of GDP, to less than 3 percent of GDP by 2005, according to Maastricht Treaty requirements. In order to achieve this goal, Athens will have to make savings equal to at least 1 percent of GDP, or about 1.5 billion euros, during the current and next fiscal years. The Greek government will be able to choose when the spending cuts will apply. The Ecofin decision notes that Greece’s exceeding of the budget deficit limit is due to the high cost of the preparations for this summer’s Athens Olympics, compensations paid out to farmers, high primary spending (wage increases and other «social» spending), as well as the «deficient budget revenues» from Value Added Tax (VAT) and income tax. The Council described Greece’s public debt as «worrying,» especially «at a time of strong GDP expansion.» It was also noted that «existing evidence points to new, significant upward revisions of budget deficits for 2003 as well as for previous years.» The revision is expected in September, when the current audit of public accounts, carried out by the recently elected government, will be completed. Should this be the case, Ecofin added, there will be additional demands made to the Greek government, «concerning the extent of measures necessary to correct the problem of high deficits.» It thus seems that the obligation to limit expenses by at least 1 percent of GDP will almost certainly be revised upward. Alogoskoufis stated that «just as our national (soccer) squad gained the European Championship through teamwork, so must we work as a team in order to face the large deficits we inherited from (the previous) government.» Yet, on Monday it became once again obvious that after the November «coup» by large countries that violate the Stability Pact, the European Commission’s enforcing role has been de facto negated and the biggest states have decided to respect it at their own discretion. Even though Greece was slammed with the excessive deficit procedure, Italy was able to buy time. Italian Prime Minister Silvio Berlusconi, representing his country before the Council, since he also holds the portfolio of economics minister, was able to avert the warning by promising that all measures will be taken in order for his country to limit the deficit to less than 3 percent of GDP. Ecofin postponed a decision on who will represent the eurozone members to the international community. The prime minister of Luxembourg, Jean-Claude Juncker, is a candidate, but it has not yet been determined what his exact responsibilities will be or even if such a position will be established.