ECONOMY

Call for stricter budget

European Economic and Monetary Affairs Commissioner Joaquin Almunia hinted strongly that the European Commission might not accept the securitization of debt owed to the government to bring the 2006 budget deficit below 3 percent of Greece’s GDP. «This operation should not be an important element of Greece’s 2006 fiscal adjustment,» he said, adding that the budget should include more structural reform. «Securitizations are one-off measures; this kind of one-off measure will be assessed by Eurostat, using its professional independence. It is up to Eurostat to decide,» Almunia told the Greek Parliament, adding, «We are worried about Greece’s public finances.» The securitization of debt would enable the government to shave off about 0.6 percent of the budget deficit for both 2005 and 2006. The 2006 budget, submitted to Parliament this week provides for a deficit of 2.8 percent in 2006, down from 3.6 percent in 2005 and 6.6 percent in 2004. Almunia did approve of the use of securitization for 2005, calling it a «statistical technique to offset a revenue lag… However, securitization in 2006 is altogether different.» Almunia put paid to opposition Socialist MPs’ claims that the new conservative government’s audit of state finances consisted solely of artificially inflating past years’ expenditures. «The improvement (in financial reporting) was real,» he said, adding that, though there was a problem with the reliability of almost all members’ fiscal data, «Greece’s case was the most serious and has been debated throughout the EU and the world financial community.» Alogoskoufis said he was confident Brussels would accept the move – which was also undertaken by Portugal in the past. «If Greece’s securitization to help lower the deficit is not approved, then there will need to be a revision of other countries’ deficits where the same method was used, Portugal, for example,» said Alpha Bank economist Dimitris Maroulis. Greece angered its EU partners when it revealed it was running budget deficits well above the EU limit for years. In 2004, when it hosted the Olympics, its fiscal gap ballooned to 6.6 percent of gross domestic product (GDP). «The situation of (Greek) public finances is still worrying and the insufficient reforms are exposing the country to the growing risks arising from aging and globalization,» the commissioner said in a speech late on Wednesday. His strict comments prompted one Greek daily to post a banner, front-page headline: «Typhoon Almunia strikes Alogoskoufis.» But Eurogroup President Jean-Claude Juncker offered some relief to the conservative government that came to power in March 2004, saying that after meetings with Alogoskoufis and Prime Minister Costas Karamanlis, he was confident they were on the right track. «They are undertaking strong and difficult action… The government is acting in a responsible way and we have to encourage and support that,» he told reporters in Athens. (Kathimerini, Reuters)