ECONOMY

Budget deficit at 4.3 pct

Greece’s 2005 budget deficit fell to 4.3 percent of gross domestic product, in line with the government’s forecast in its revised 2005 budget, the Finance Ministry said yesterday. The government has promised to bring the deficit to below the EU-mandated 3 percent of GDP in 2006. Partly swollen by a surge in spending for the Olympics, the country’s fiscal deficit reached 6.6 percent in 2004. The deficit amounted to 10.6 billion euros from 12.86 billion in 2004, the ministry said. Budget revenue in 2005 rose 7.5 percent on the year compared with a target of 6.7 percent. The overshooting of the target was largely due to higher proceeds from VAT and property transfer taxes, resulting from a surge in transactions ahead of the imposition of VAT on new constructions as of January 1 this year. In total, 42.2 billion euros went into public coffers, from 39.2 billion in 2004. Collection slack Nevertheless, the figure attained was 1.5 billion short of the initial budget target of 43.7 billion (11.3 percent higher). This was subsequently abandoned due to a significant slack in the tax collection mechanism which resulted in extensive tax evasion. Government spending rose 5.6 percent in 2005 compared with 2004 to 48.05 billion, slightly above the target of a 5.3 percent rise. One in two ministries exceeded their spending targets, notably those of health, transport and communications, and the general secretariat for information. Interest payments rose 3.3 percent from 2004, against an initial target of 0.5 percent. No budget has fallen within initial targets in the last 15 years. In most cases, governments would revise targets, transfer funds appropriations from one year to the next and count in revenues which Eurostat ultimately rejected. In 2006, the Finance Ministry is looking for an additional 4.2 billion euros in revenue, in relation to last year. Of this, 743 million is budgeted to come from income tax, 1.1 billion from concessions of government rights and extraordinary dividends from state-controlled enterprises (ATEBank), 340 million euros from non-tax revenues and the rest from battling tax evasion.