ECONOMY

Gov’t starts worrying about deficit as H1 spending soars

Finance Ministry officials are on red alert as the result of a serious deterioration in public finances in the first half. According to data released yesterday by the General Accounting Office, expenses are increasing rapidly, having already breached the annual target of 4.9 percent. During the first half of the year, public expenditure surged by almost triple the target, at 12.7 percent, while primary expenses alone rose by 16.7 percent year-on-year. The runaway rates of rising expenditure are naturally seen as a serious development, threatening to deplete available funds. According to the latest data, the Economy and Finance Ministry spent a full 82 percent of its annual budget in the first half of the year, the Ministry of Transportation and Communications, 81 percent, the Ministry of Merchant Marine, 68 percent, and the Ministry of Public Works, 65 percent. Economy and Finance Minister Giorgos Alogoskoufis last month stressed the need for public spending to fall by 1 percent of gross domestic product (GDP) by the end of 2005. During the first half of the current year, the public deficit swelled to 8.7 billion euros, up 26 percent in comparison with the same period last year. These figures are seen as leading to yet one more revision of the public deficit, to around 4 percent of GDP, compared to the government’s last projection of 3.2 percent, when it completes the ongoing process of taking stock of the economy, estimated to be ready in the autumn. Revenues rose 5.8 percent in the first half of the year, against a target of 9.4 percent in the initial revision and 6.3 percent projected by the previous government. In spite of the current problems, the government is hoping to raise an additional 3.5 billion euros during the second half of the year from the recently announced measure of giving small firms and the self-employed the option of irrevocably settling tax obligations for the years 1999 to 2002 against blanket sums, from new favorable provisions for settling outstanding tax debts and from overdue tax declarations that had not been filed by the end of 2003. One encouraging sign concerning the development of public revenues comes from the inflows of European Union investment subsidies – included in the budget’s Public Investment Program – which appear to be recovering after months of decline. A total of 1.1 billion euros flowed into the public coffers in the first half of 2004, against 690 million euros in the same period last year.