GDP growth still high

Brussels – Economy and Finance Minister Giorgos Alogoskoufis said indicators over the Greek economy’s direction in the second half of the year were positive. [Alogoskoufis, who attended the Eurogroup and Ecofin meetings on Monday and yesterday, was referring to the prospects of reducing the fiscal deficit through an increase in revenue and control of spending]. European Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters yesterday that the Commission will have a clearer position over where the Greek deficit is headed in November, when Alogoskoufis will present the draft 2006 budget. At about that time, the Commission will submit a paper on Greece’s deficit reduction process. [Greece, which has posted a 2004 budget deficit that is still provisional and equal to 6.7 percent of its GDP, has committed itself to bringing the deficit below 3 percent of GDP by 2006]. The Greek government will submit a progress report on the deficit to the European Commission by the end of October, indicating whether it had succeeded in implementing the Commission recommendations, approved by the Ecofin earlier this year. Yesterday’s Ecofin session did not discuss Greece’s case. It had more urgent business to do, such as deciding on how to limit terrorists’ financial resources, examine the cases of Italy and Portugal – which, like Greece, have posted excessive budget deficits – and discuss the prospects of potential new Eurozone members among the ten countries that joined the EU last year. The Commission, however, is kept up-to-date on major Greek economic indicators on an almost daily basis through politicians’ or, more often, technocrats’ meetings. Thus, Almunia said, if by November Greece has made significant progress in fiscal policy, the Commission will publicly say so. If not, there will be «discussions» about future developments, without abandoning the target of bringing the deficit down to acceptable levels by 2006. Alogoskoufis, who also met privately with Almunia, said that GDP growth in the first half of the year was an encouraging 3.5 percent, lower than the 2005 budget predicted, but at the high end of the estimates of EU and other international organizations. Alogoskoufis said there was some positive developments on employment, although the unemployment rate was still high (about 11 percent). Alogoskoufis also met with Regional Policy Commissioner Danuta Hubner and Competition Commissioner Nellie Kroes. In the first meeting, he expressed concerns over the impasse on the EU budget which, if it continued, might cost Greece significant funds. Greece is fighting to maintain a high level of funding for the 2007-2013 period in the face of pressure from big countries to cut the budget as well as competition for funds from the poorer new members from Eastern Europe. Alogoskoufis also reminded his Ecofin colleagues that Greece’s economic growth was more vulnerable to high oil prices, due to the country’s higher dependence on energy imports.

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