ECONOMY

Gov’t believes EU report on 2006 deficit ‘conservative’

The government insisted yesterday that a European Commission projection that Greece’s public deficit in 2006 would be lowered to just the prescribed ceiling of 3 percent of gross domestic product (GDP) was too pessimistic. «It’s a fact that the Commission’s estimates are more conservative than ours,» Finance Minister Giorgos Alogoskoufis told reporters after the release in Brussels of the spring economic forecasts for the 25-nation bloc. «Greece’s target for the 2006 deficit remains 2.6 percent.» Alogoskoufis pointed out that in November 2005 the Commission forecast a 2006 deficit of 3.8 percent, which it has now scaled down to 3 percent. He also contradicted the warning that the budget deficit would again climb again to 3.6 percent in 2007. «We shall not allow the deficit to rise over 3 percent in coming years… Nevertheless, it will take some years before Greece achieves a balanced budget,» he added. «The Commission’s forecasts for 2007 cannot take into account any new provisions in the coming budget and are based on an estimate for the 2006 deficit,» he said. Alogoskoufis said attainment of the target would allow for a more vigorous social policy and that the government would keep its pledges regarding pension supplements and tax breaks. Fiscal measures in coming years will place emphasis on cutting waste in the public sector and fighting tax evasion, he emphasized. EU Monetary Affairs Commissioner Joaquin Almunia said in Brussels that Greece had been asked to continue efforts to reduce its 2006 deficit in a sustainable way, and the Commission was expecting to see measures for 2007. «We look forward to (seeing the) Greek authorities adopt measures in the 2007 budget to continue on a reduction path,» Almunia said. Referring to other matters, Alogoskoufis said he expected all sides to show a spirit of responsibility in the dialogue of reforming the country’s social insurance system, which will be launched with a debate in Parliament on Thursday. «Everyone must seriously discuss the issue which has been posing serious concern for years, and leave petty politics aside,» he said. A recent Bank of Greece report said reform depended on improvement in both public finances and the labor market’s functioning. «The magnitude of adjustment required in Greece’s case is greater than in other EU countries,» it said.