ECONOMY

Alogoskoufis says measures beginning to show results

Economy and Finance Minister Giorgos Alogoskoufis yesterday appeared confident that the government’s economic policies were working and that the final 2005 budget deficit would be lower than initially predicted. Speaking to a parliamentary committee examining the draft 2006 budget, Alogoskoufis announced that, during November, revenues increased by 9.1 percent compared to November 2004 and that revenue growth for the first 11 months of the year stood at 5.4 percent, versus a budget target of 5 percent. Alogoskoufis did not mention that the revenue target has been revised twice, down from a far more ambitious 11 percent. «It is not excluded that we may have, happily, underestimated (revenue growth) and that the deficit will be cut even further than we had predicted.» The government had initially estimated the budget deficit as equal to 3.6 percent of GDP, revising it upward to 4.3 percent when the European Commission hinted that it would not accept one-off measures, such as the securitization of debt owed to the state. In any case, the big revenue gains in November have been a boost for Alogoskoufis who worried that even the new, far more modest target would not be fulfilled. Most of the increase is due to growth in VAT revenues, which jumped to 11.6 percent in November from 9.3 percent in November. The minister said revenue growth was the result of government efforts to crack down on tax evasion. «Already, the Special Inspections Service has been very successful. The Finance Ministry services have been reorganized and are electronically cross-checking records,» to detect discrepancies between declared income and tax paid. «We will also make it mandatory once again to submit regular VAT declarations online,» Alogoskoufis added. Alogoskoufis also told MPs that the law on investment incentives voted on early in the year was beginning to show results: By November 25, 890 investment plans had been submitted to the government, with a total budget of 1.81 billion euros. Of those, 389 plans had been approved; the approved plans are worth 581 million euros and will create 2,340 jobs, Alogoskoufis said. The government must pass three important pieces of legislation ahead of Parliament’s Christmas recess: the 2006 budget, which will be voted on at the last session before the holidays, the law imposing VAT on new buildings and the bill increasing government oversight on state-controlled public utilities and effectively abolishing jobs for life at these utilities. The government considers that safe passage of all three will improve the economic climate and its own standing. Yesterday, Alogoskoufis discussed these bills in a meeting with Prime Minister Costas Karamanlis. The implementation of the 2006 budget, with its ambitious deficit-cutting and growth goals, which have been questioned by the European Commission and international organizations, such as the OECD, will be crucial in determining whether the government will be able to cut income tax beginning in 2007.