Hopes set on economic growth

The government’s economic chief yesterday confirmed that the maintenance of a high growth rate remains a top policy goal in 2005 – a «crucial year» for the economy. «After the success of the Olympic Games, the bet is to keep growth high in order to be able to deal with unemployment and social problems,» Economy and Finance Minister Giorgos Alogoskoufis said after the year’s first meeting with the prime minister. He said the second of three key targets is the strict and successful execution of the budget, which provides for roughly halving the deficit down to 2.8 percent of gross domestic product (GDP) in 2005, compared to last year. The third goal is the settling of open issues with the European Commission, which has expressed serious concern over Greek fiscal deficits and will consider recommending close supervision of the execution of the budget by the EU Economy and Finance Ministers Council (Ecofin). The Commission has cast doubt on Greece’s ability to bring the deficit below the prescribed 3 percent of GDP. The government itself, too, admits it is an extremely difficult endeavor. The Commission is also doubtful about the government’s target of a 3.9 percent growth rate, seeing it reaching no more than 3.5 percent. The higher the growth rate, the easier it will be for the deficit to be tackled as public revenues will be higher. The 2005 budget deficit will also be affected by the 2004 figure. Deputy Finance Minister Petros Doukas, who is overseeing the budget, said recently that the deficit may go as high as 6 percent for 2004, but Alogoskoufis later insisted the budget’s projection of 5.3 percent will be attained. Doukas’s pessimistic projection is seen as an attempt to pre-empt criticism, shifting part of the responsibility to his peers in the same ministry, Adam Regouzas and Christos Folias. The latter’s responsibilities include the management of the European Union-subsidized Fourth Community Support Framework (CSF) investment program and the amounts that will flow in. Folias said last month that CSF absorption rates have been disappointing and efforts are being made to accelerate them. Separately, Drakoulis Fountoukakos, chairman of the Athens Chamber of Commerce and Industry, said that even though the country’s fiscal situation is dire, greater effort is required to reduce taxes and expenses. He recognized that the recently unveiled bill on investment incentives is «the boldest so far and can prove an important instrument for growth in coming years.» Fountoukakos predicted that the growth rate will be in the order of 3.3-3.9 percent in 2005.

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