ECONOMY

Government begins hard slog of drafting the 2005 budget

Mindful of the daunting constraints facing public finances, Economy and Finance Minister Giorgos Alogoskoufis will be launching an early series of meetings on the drafting of the 2005 budget at the General Accounting Office next week. The shortfalls in public revenue in particular are causing a headache to the government’s economic staff, who are both having to meet the requirements of an expansive current budget in terms of expenditure, and also plan for 2005 without the tricks of creative accounting used by the previous PASOK government. The serious prospect of the 2004 budget deficit ultimately climbing higher than the limit of 3 percent of gross domestic product (GDP) prescribed by European Union fiscal rules signals the extremely tight leeway afforded to economic policy next year. Last but not least, the spending overruns for next month’s Olympic Games cast an additionally heavy burden on the fiscal situation, giving advance notice of even higher public borrowing requirements in the coming years. The government is now targeting the presentation of the new budget draft to Parliament in early October. It hopes the measures it recently announced for the favorable settlement of outstanding tax debts and for granting clean bills for past fiscal years to firms and self-employed professionals on receipt of «blanket» sums will relax the fiscal stringency. The acceleration of inflows of European Union investment subsidies under the Third Community Support Framework (CSFIII) after long delays this year offers additional hope of a way out of the straits. Nevertheless, these EU inflows are still way behind targets and are considered the Achilles’ heel in the implementation of EU-subsidized projects. The government hopes to attain a fuller picture of public finances after the ongoing process of taking stock of public utilities’ huge debts, notably those of hospitals, and after defense budget are completed, as expected, in autumn. Two bills now in the drafting phase, concerning an overhaul of the tax system and investment incentives respectively will form the two pillars of economic policy. They are expected to take final shape after the summer.