ECONOMY

A gentler post-Olympics fiscal picture for Greece

The government’s economic chiefs said yesterday that cost overruns for Olympic projects have significantly increased the country’s budget deficit above initial projections, but the completion of works will considerably lighten the country’s fiscal burden in 2005 and the deficit stands a good chance of being brought within the 3 percent EU guideline next year. «We are in control of the situation and the deficit in the budget we shall table will easily decline… We shall do our utmost to bring it under 3 percent of gross domestic product (GDP) in 2005,» Economy and Finance Minister Giorgos Alogoskoufis told German newspaper Frankfurter Allgemeine in an interview. Alogoskoufis said the deficit will stay above 3 percent this year and probably grow well over the initial projection of 3.2 percent of GDP earlier this year. He said 2005 will be a year of adjustment for public finances, with cuts in public expenses and new sources of revenue, starting with a series of privatizations planned for the next three years. Alogoskoufis said he prefers investment by foreign banks in Greece rather than the merger of Greek banks which the previous government seemed to favor, and does not plan the sale of state interests in banks. The privatizations will include the management of ports and airports. He said the government in November will table legislation simplifying the country’s tax system and regulatory framework with a view to making it more attractive for investment in sectors such as tourism and food processing. Separately, Alogoskoufis’s deputy, Petros Doukas, has offered an even more pessimistic view of the deficit this year. «The budget for various Olympic projects was 1.4 billion euros (for 2004), the first tally we did set the sum at 2.4 billion, and now we are way beyond that at 3 billion euros for 2004,» he told Flash Radio in an interview. In a predated contact with Reuters, Doukas said, «The way things are going, the budget deficit is heading toward 4 percent, maybe a bit over.» «Expenses like salaries, pensions, subsidies of pension funds are more or less inflexible; one cannot say we can apply any measures in salaries or pensions,» he told Flash yesterday. «What we can try and do as much as possible is cut defense spending, bring the private sector in as much as possible into public works projects so that they are self-financing, do away with unnecessary spending, and, of course, speed up privatizations,» he added. Reuters quoted a European Commission spokesman as saying Brussels would reserve comment for September, when it is due to receive official data from the Greek government. The General Accounting Office said yesterday that the country’s budget deficit swelled to 8.7 billion euros in the first half, up 26 percent year-on-year. Doukas said the cost of the Olympic Games was estimated to exceed 6 billion euros, against an original budget of 4.6 billion.