Finance minister asked to square the circle

Economy and Finance Minister Giorgos Alogoskoufis faced two entirely different, even conflicting, sets of demands yesterday when he met successively with representatives of the Federation of Northern Greece Industries (SVVE) and the General Confederation of Greek Labor (GSEE). Both meetings were dominated by the record oil prices and their impact on the Greek economy. SVVE representatives asked for accelerated economic reforms and emphasized the effect of expensive oil on production costs. «Businesspeople cannot afford to be generous (with pay),» SVVE’s president Giorgos Mylonas told reporters after the meeting. For their part, the unionists asked that the oil price rise not have any negative effect on incomes. GSEE’s president Christos Polyzogopoulos also announced that, on Thursday, the union’s Labor Institute will make public a report on the state of the economy that will include policy recommendations. Alogoskoufis will meet with GSEE’s executive again on September 19, after Prime Minister Costas Karamanlis will have announced the priorities for the coming year’s economic policy at the Thessaloniki International Fair. After the meetings, Alogoskoufis told reporters that, despite negative developments on the oil markets and continued sluggish growth in the eurozone, Greece’s gross domestic product (GDP) had grown by 3.5 percent year-on-year in the first quarter. Second-quarter growth will be as fast, he added. In its draft 2005 budget, the government had forecast 3.9 percent GDP growth for 2005. Alogoskoufis said yesterday that he expected the actual growth rate to be 3.6 percent, although at some point there were fears it would slip below 3 percent. Estimated growth for 2006 is also 3.6 percent, still far from the 5 percent rate the ruling New Democracy party had boasted it could achieve. The imperative target for the 2006 budget is to bring the deficit below 3 percent of GDP. Achieving it will depend on putting a lid on government spending.