Securitization officially buried, minister admits

The government has abandoned its attempt to reduce the 2005 and 2006 budget deficits through the securitization of debt owed to the state without waiting for the final verdict of Eurostat, the European Union’s statistics agency, Economy and Finance Minister Giorgos Alogoskoufis announced yesterday. «The issue of securitizing overdue debt is over. I am not discussing this with anybody,» Alogoskoufis replied to a reporter’s question. Eurostat was supposed to decide this month whether to accept a one-off measure, such as securitization, as a legitimate means to cut the deficit. Apparently, Alogoskoufis, who was in Brussels earlier this week, was told by European Economic and Monetary Affairs Commissioner Joaquin Almunia to forget it. Almunia had first criticized the use of securitization in October during a visit to Athens when he visibly annoyed Alogoskoufis during a joint press conference with his insistence that Greece ought to use lasting measures to combat deficit. At first, Alogoskoufis had hinted that he would fight tooth and nail to keep the measure, turning the issue into a political one at the January meeting of European Finance Ministers (Ecofin). However, he suddenly backed down in November by announcing that securitization would not be used to cut the 2005 budget deficit, even though Almunia had said he could condone its use in 2005 but not in 2006. Even without the help of securitization, the government has cobbled together a budget which, it insists, will cut the deficit from 4.3 percent of GDP in 2005 to 2.6 percent in 2006. To achieve this target, Alogoskoufis repeated yesterday, spending will be trimmed and tax evasion tackled head-on. To underscore its commitment to crack down on tax evasion, the government has set a revenue increase target of 11.2 percent in the draft 2006, almost the same as the initial 2005 target, which was revised to a level about half that after failure to match the target with actual results. Critics of the budget have also noted some suspiciously underfunded items, such as the government’s contribution to the Social Security Foundation (IKA), in order to argue that the proposed budget cannot possibly be implemented. Alogoskoufis not only insisted that the 2.6 percent deficit target is achievable, but added that the updated Stability Pact estimates to be submitted to the Commission in a few weeks’ time will include further deficit cuts, to 2.3 percent of GDP in 2007 and 1.7 percent in 2008. Alogoskoufis also defended the proposed bill that is to tighten the reins on the state-owned public utilities as the government’s greatest reform so far. He added that the state should no longer exercise authority over listed utilities, such as OTE and PPC. «The state should not oversee listed companies but markets,» he said. Later, while introducing a bill imposing VAT on new construction from 2006, Alogoskoufis told MPs that opposition to the bill stemmed from tax-evading contractors and argued that the bill’s provisions will actually help the market.