ECONOMY

Budget on course for deficit less than 3 pct of GDP, minister says

Budget revenues exceeded government targets in the first half of 2006, Economy and Finance Minister Giorgos Alogoskoufis told reporters yesterday. Net revenues increased 11.4 percent over the same period in 2005, Alogoskoufis said, topping the annual growth target of 10.3 percent. Primary spending rose 6.7 percent, slightly over the annual target (6 percent), but total spending, including paying interest on debt and some of the principal, increased just 0.3 percent, far lower than a 2006 target of 4.45 percent, mainly due to a significant decline in interest payments. Based on the above, Alogoskoufis said, the government is still on target to reduce the budget deficit to 2.6 percent of GDP from 4.3 percent in 2005 and comply with the requirements of the European Union’s Stability and Growth Pact for the first time. Alogoskoufis referred to a recent statement by European Commission President Jose Manuel Barroso that the Greek economy would remain under supervision for excessive deficits in 2007. «According to the procedure, it is not enough for a country to reduce its deficit to below 3 percent (of GDP) for just one year. Our aim is to keep the deficit below 3 percent this and next year, so that the European Commission, having examined our 2007 budget, can forecast Greece’s exit from the excessive deficit procedure (by the end of next year),» he said. Thus, «there is no leeway for spending above and beyond what has been entered into the budget,» Alogoskoufis said, once again warning his Cabinet colleagues who have lately increased their demands for extra appropriations. On he contrary, he said, they should try to cut whatever spending items they can. Another positive sign for the economy is its continued high growth, which, so far, has not suffered from the much-feared post-Olympic slowdown; in the first quarter, GDP grew at an annual pace of 4.1 percent. Alogoskoufis’s deputies also presented developments in their sector. Deputy Minister Christos Folias, in charge of EU funds, said that Greece had managed to absorb 45 percent of the funds earmarked through the Third Community Support Framework program (CSF III), «up from 21 percent in its first four years,» he said. In trying to advertise the improvement over the previous government’s efforts, Folias exposed the inability of the present government to live up to its promises to accelerate the absorption rate. On June 8, 2004, the government had announced that the CSF III absorption rate would stand at 37 percent at the end of that year. Instead, the government’s cuts in the public investment program have brought things to the point where Alogoskoufis is lobbying for an extension to the CSF timetable by a year, to end-2009.