ECONOMY

Runaway spending makes it difficult to limit deficits

The latest expenditure estimates from the General Accounting Office show that spending overruns will reach 2 billion euros in 2004. This means that it will be extremely difficult to contain the 2004 budget deficit to below 3 percent of the country’s gross domestic product (GDP), as mandated by the European Union’s Stability and Growth Pact. Economy and Finance Minister Giorgos Alogoskoufis has undertaken to keep the budget deficit within the Pact’s limits, but reality indicates otherwise. The expenditure overruns are a mixture of pre-election spending and budget overruns for Olympics-related projects. Despite the delays in the construction of many venues and related infrastructure, contractors were given bonuses for early completion by the present government. This would probably have been inevitable in any case, as the situation left the government open to blackmail. During the first five months of 2004, primary spending rose 14.7 percent compared to the same period in 2003, against a target of 4.9 percent. Last week, the EU decided that Greece must cut spending by 1 percent of GDP by end-2005.