Borrowing needs decline, but only slightly, in 2005

The central government’s net borrowing needs in the first seven months of 2005 eased to 6.3 percent of gross domestic product (GDP) on a cash basis from 6.7 percent in the same period last year, central bank data showed. The Bank of Greece said the central government’s budget deficit came to 11.56 billion euros, affected by outlays of 1.77 billion to public hospitals in order to pay their suppliers, and another 1.028 billion to boost ATE Bank’s equity capital in a recent rights issue. Conversely, proceeds of 1.09 billion euros from the sale of a 16.44 percent stake in gaming group OPAP partly offset the outlays. Excluding these transactions, the central government’s deficit came to 9.44 billion euros or 5.3 percent of GDP, the central bank said. It said the central government’s deficit based on borrowing needs on a cash-flow basis «differs significantly» from national account data, which record transactions when they are generated and not when actual disbursements or receipts take place. Cash-flow data also include financial transactions such as privatization proceeds or outlays to acquire assets, which are not included in national account data. «For these reasons, borrowing needs usually differ from the respective national account data and do not pre-determine the course of the deficit,» the central bank said. The central bank added that the deficit of the Public Investment Program was limited to 1.55 billion euros (0.9 percent of GDP) in the January-July 2005 period from 3.48 billion euros (2.1 percent of GDP) in the same period last year. This was partly the result of smaller EU cash inflows. Greece is struggling to squeeze its budget deficit to below the European Union’s 3 percent of GDP limit by 2006 from 6.1 percent last year through tighter public spending. But weak revenue growth forced the center-right government to hike VAT tax rates by one percentage point in April to 19 percent to shore up public finances. (Reuters/Kathimerini)