Economy and Finance Minister Giorgos Alogokskoufis has been largely resting his hopes for meeting the budget targets this year and next on the securitization of old tax debts, essentially a bank loan. Last week, he won tentative approval for 2005 – but not for 2006 – from visiting EU Commissioner for Economic and Monetary Affairs Joaquin Almunia, who insisted that the government must find revenue collecting sources of a more permanent nature. The Commission is still considering the government’s securitization scheme for 2005 and official approval is still pending. Alogokskoufis has a serious problem. Although the economy has done better than expected this year, public finances have not followed suit. Gross domestic product (GDP) is projected to reach 180 billion euros in 2005, against 167 billion last year and an initial government forecast of 177 billion. But tax revenues are projected to amount to 41.5 billion euros at best, against a budget forecast of 44 billion and 39.5 billion euros in 2004. The securitization is, ultimately, part of the difference between the initial forecasts and the currently projected figures for the year. The budget revenue shortfall will be around 2.1 billion euros. Instead of adopting emergency measures, Alogoskoufis is resorting to a financial instrument which bolster state books by 1.8 billion euros. No one can blame the government for this choice. In contrast to the practices of its predecessor, this accounting arrangement now has full transparency. This is acknowledged by officials in Brussels, but, nevertheless Almunia, on the same day he landed at Athens airport, told the Financial Times he will adopt measures to stop European governments from resorting to accounting «tricks» designed to show public deficits lower than they actually are. The government has put two important arguments on the table in order to win approval for the securitization. One is that it has adopted a series of structural measures (of the type demanded by the commissioner), which amount to 0.6 percent of GDP, exactly in line with commitments undertaken under the Stability Program last March. The second, and more important argument, is that the government «does not wish to put the economy’s growth rate in jeopardy.» Severe austerity measures risk inflicting on the Greek economy what Portugal’s suffered a few years back. Most likely, the price of Alogoskoufis’s insistence on the policy of mild adjustment will be a refusal by the Commission and the EU’s economy and finance ministers to take Greece out of the regime of supervision which they imposed in March. This is rather painless: The Brussels technocrats will have difficulty in sticking to Almunia’s view that Greece is in violation of the Stability Pact and that, therefore, it will have to take a cut in subsidies from the Cohesion Fund. But beyond the apparently aggressive dogmatism from Brussels, the reality does not change. Alogoskoufis has reduced the deficit, from 6.6 percent of GDP in 2004 to a probable 3.6 percent this year, largely due to the absence of expenses for the Olympic Games, but also through serious cuts in public investment and a small trimming of expenses. He could have done better, but he has to do so next year, when he is required to bring the deficit below the prescribed 3 percent limit.