Two years to mend fiscal ways
BRUSSELS (Reuters) – The European Commission today will give Greece an extra year to lower its budget deficit to below the 3 percent European Union ceiling, according to the EU executive’s draft recommendation. The document, seen by Reuters on the eve of its final approval, extends the deadline for Greece to comply with budget deficit rules set by the EU Stability and Growth Pact to 2006 from 2005. «Greece shall put an end to the present excessive deficit situation as rapidly as possible and at the latest by 2006…,» said the Commission’s paper, which needs to be endorsed by EU finance ministers. Massive revisions to Greek budget data have shown that it has broken the EU deficit cap every year since 1997, and the Commission believes this year’s deficit will fall to 3.6 percent of GDP from 5.5 percent estimated for 2004. Greece’s 2005 target for its budget deficit is 2.8 percent of GDP, but the EU does not believe the goal can be met and has launched an excessive budget procedure against the country, which could end in a huge fine and a freeze on some EU aid. The Commission recommends that Greece implement «in 2006 adjustment measures of a permanent nature leading to a correction in the deficit of at least 0.6 percentage point of GDP.» It should also rigorously implement its 2005 budget and take measures to reduce public debt, which the Commission estimates at 112 percent of GDP – the highest level in the EU. The Commission has given Greece until March 7 to submit a report detailing measures needed to lower the deficit in line with those recommendations. It will also tell Greece to make further efforts to ensure its budget data are in line with EU rules. In a long-term recommendation, the Commission will tell Greece to reduce its cyclically adjusted deficit by at least 0.5 percentage points per year after the country corrects its excessive deficit to below 3 percent of GDP. The Commission’s draft recommendations could still be modified at the EU executive’s meeting today.
