High growth will continue, says top economic adviser

Greece expects to sustain high economic growth in the second quarter of 2006, helping efforts to cut its budget deficit and avoid EU sanctions, the government’s chief economist said yesterday. «In the first quarter we had 4 percent growth,» Plutarchos Sakellaris told Reuters in an interview. «Indications are very good that GDP growth will continue at a high pace in the second quarter.» Greece’s economy is growing about twice as fast as the eurozone as a whole, boosted by exports, strong residential construction and a pickup in government investment. GDP grew 3.7 percent in 2005 and Greece has forecast 3.8 percent expansion for 2006 and 2007, slightly higher than the European Commission’s forecasts of 3.5 for 2006 and 3.4 for 2007. Greece revealed in 2004 it under-reported its budget deficit to Brussels for years, including 2001, when it joined the eurozone. It must bring the figure – at 4.5 percent of GDP in 2005 – below the 3 percent EU limit this year or face sanctions. It has pledged to narrow the budget gap to 2.6 percent of GDP in 2006 and 2.3 percent in 2007. The European Commission has given more pessimistic forecasts, seeing the deficit at 3 percent this year and widening to 3.6 percent in 2007. Sakellaris said Greece was confident it would meet the targets it set for itself and that discrepancies were due to the fact the Commission has not updated its figures. «We believe the 2.6 percent target is credible,» he said. «For 2007, the European Commission’s 3.6 percent forecast assumes no policy change, while we have already factored in measures such as spending cuts.» He said that this year, one-off measures approved by Brussels would add 0.6 billion euros to state coffers, including 450 million from advance payment of corporate tax and some more from a fuel tax surcharge. Sakellaris, who chairs the Finance Ministry’s council of economic advisers, said the high pace of revenue growth was making Greece’s center-right government optimistic it would soon exit the EU’s excessive deficit procedure. «Revenues are going really well. Our target for the year is (a rise of) 6.6 percent and we had over 10 percent in the first four months of the year,» he said. «This is mainly due to the effective battle against tax evasion, which is bearing fruit.» Electronic cross-checking has forced thousands of companies to come clean and pay tax due. «(The measure) revealed discrepancies of over 7 billion euros. It has also acted as a deterrent,» Sakellaris said.