4.5-pct growth in 2002

The National Economy and Finance ministries are busy preparing the 2002 budget, which this year will be submitted to Parliament on October 1, earlier than usual. The assumption behind the budget is that Greece’s gross domestic product will increase by 4.5 percent in 2002. National Economy ministry officials said yesterday that the repercussions of Tuesday’s terrorist attacks in New York and Washington on the world economy may lead to a slight downward revision of GDP growth. Other assumptions include an average inflation of 3 percent (currently at 3.8 percent), a 7 percent growth in public revenues, and a 6.2 percent growth in primary spending. On the basis of European Union estimates, it is also assumed that the euro will average 89 US cents and that the price of crude oil will average $28 per barrel. Behind the government’s optimistic facade, ministers and ministry officials are worried about the course of the economy next year. The recent events in the US are the cause; before the attacks, European Union officials estimated that the American economy would come out of its current slowdown by May 2002. The terrorist strikes and their consequences will likely postpone recovery and increase the dangers for the world’s economy. If a deep worldwide recession ensues, Greece will face a number of problems. While the government may declare that the EU-funded Third Community Support Framework, with its expected inflows of 17 trillion drachmas (49.9 billion euros) in the period to 2006, will keep economic growth high, such optimism may prove illusory. Most importantly, no one can guarantee that a Europe in recession will channel these huge funds to Greece. The government is perfectly aware of this, and the ministers concerned are also aware of the EU’s determination to follow the new funding procedures by the book. If this happens, Greece may lose some of the funding because of the lax internal monitoring procedures. This will have great repercussions on the fragile fiscal surplus, in itself a marvel of accounting techniques. Balkan Reconstruction

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