ECONOMY

EU to keep a watchful eye on Greece in 2007

Greece will remain under close European Union supervision in 2007 even if it shrinks its budget gap to below 3 percent of GDP this year, the head of the EU executive Commission told a Greek newspaper yesterday. «The correction of Greece’s fiscal deficit in the last two years was quite significant, taking into account that the deficit was 6.9 percent in 2004 and is expected to fall to 3 percent this year,» Commission President Jose Manuel Barroso told the Greek newspaper To Ethnos in an interview. «However, this correction must be viable, which is not currently the case, based on Commission projections,» Barroso said. «This means structural measures of a more permanent nature are needed to keep the deficit below 3 percent.» Greece, which joined the eurozone in 2001, is scrambling to bring its fiscal shortfall to below the European Union’s 3 percent ceiling to avoid EU sanctions. The government is targeting a fiscal gap of 2.6 percent this year, despite more pessimistic EU Commission projections which see the deficit shrinking to just 3 percent. Barroso told the paper that exiting the EU’s so-called excessive deficit procedure, which went into effect in 2004, would not be attainable next year for Greece. «For this to happen we would need to be sure that the deficit in 2007 will also be below 3 percent. Based on our recent estimates, without a change in policy, the deficit could reach 3.6 percent next year,» Barroso said. The head of the EU Commission also urged Greece’s center-right government to make sure that its goal to reduce the country’s public debt to 100 percent of GDP by 2008 is met. «With public debt at 107.5 percent of GDP in 2005, Greece still had the highest debt-to-GDP ratio in the EU, a situation that must be corrected in a viable way as it will benefit the economy and the credibility of the EU’s Stability Pact as well,» Barroso said. (Reuters)