ECONOMY

Almunia notes Greek fiscal progress; Alogoskoufis stays even more upbeat

BRUSSELS – EU Economic and Monetary Affairs Commissioner Joaquin Almunia yesterday praised the progress Greece has made in rehabilitating its public finances, but said he wants to see 2006 figures and the 2007 budget before reaching conclusions on the course of the budget deficit in the next 18 months and on ending the supervision of the Greek economy. Speaking here after the council of eurozone economy ministers (known as eurogroup), Almunia repeated his estimate of a 3 percent deficit this year and stated that for 2007 this would be expressed once he has examined the draft of the next budget. He noted that the Greek fiscal deficit declined from 6.9 percent to 4.5 percent in 2005. Economy and Finance Minister Giorgos Alogoskoufis insisted that the budget deficit will be no more than the government’s forecast of 2.6 percent in 2006. Referring to Almunia’s statement about 2005, he said the government faced a big challenge this year, since it had to avoid a post-Olympic recession and maintain high growth rates while ensuring that the public accepted the effort. In presenting the figures of the first five months of 2006 during the meeting, Alogoskoufis noted that in this period the budget deficit was reduced by 2.521 billion euros or 41.2 percent from the same period last year. Spending declined by 2.1 percent, while ordinary revenues grew by 6.7 percent (to which 409 million euros of extraordinary revenues should be added). Net revenues expanded by 10.5 percent, already covering the annual target set at 10.3 percent. Preliminary data show June revenues rising by 14.8 percent. Alogoskoufis also referred to efforts to curb tax evasion, particularly concerning value-added tax, with revenues growing by 12.6 percent in the January-May period and by 22 percent in June. The effort will continue in 2007 and 2008, he pledged, for the deficit to drop to 2.3 percent and 1.7 percent respectively, exclusively through permanent measures. CSF Alogoskoufis and the EU commissioner for regional policy, Danuta Hubner, agreed yesterday on the reduction of Greece’s participation in the EU-sponsored Third Community Support Framework (CSF) package of investment subsidies. This may reduce the amount Greece must pay to the EU coffers, but also has an impact on growth. There are 19 billion euros to be absorbed by 2008, 14 billion of which come from the EU while 5 billion would come from the Greek state. This has now gone down to 2.0-2.5 billion euros, so the funds Greece will receive will also be reduced by 2.5-3.0 billion euros. The commissioner from Poland rejected the Greek demand for a one-year extension in the absorption period of the Third CSF, which will definitely end in December 2008. Alogoskoufis suggested a tough negotiation has just begun with the EU bureaucracy regarding the forthcoming revision of the Third CSF. He added negotiations will conclude in October but did not give further details.