ECONOMY

Almunia worried over Greece’s one-off deficit-cutting tactics

European Economic and Monetary Affairs Commissioner Joaquin Almunia yesterday expressed his confidence that Greece will reduce the budget deficit to below 3 percent of its gross domestic product (GDP), but expressed his concern that Greece is reducing its deficits with one-off measures and not permanent ones. Speaking at a press conference following yesterday’s meeting of the Eurogroup – the finance ministers of the 12 eurozone countries – in Helsinki, he said that the messages he has been getting from Economy and Finance Minister Giorgos Alogoskoufis are positive but that he is aware that the 2007 budget, currently under preparation, contains one-off deficit-cutting measures to which the Commission has repeatedly voiced its opposition. Greece is set to reduce its budget deficit to 2.6 percent of its GDP, from 4.5 percent in 2005 and 6.6 percent in 2004, thus falling for the first time below the acceptable limit of 3 percent of GDP. However, the Commission and the European Council of Finance Ministers have emphasized that it will take more budgets with acceptable deficits, or, preferably, surpluses, for Greece to come out from under the Commission’s close monitoring. Almunia added that he would closely follow Prime Minister Costas Karamanlis’s speeches at the Thessaloniki International Fair, later yesterday and today, for any signs of loosening fiscal policy in the form of handouts. Alogoskoufis said yesterday he was confident of meeting his budget goals. «The implementation of the budget in the first 8 months of this year is according to plan, so we are confident that we shall achieve our targets for this year,» he told reporters on the sidelines of the Helsinki meeting. Economists worry that municipal elections in October, the ruling conservatives’ first real test since they ousted the Socialists in 2004 polls, may force Karamanlis to relax fiscal policy, jeopardizing Greek efforts to cut the deficit. Asked about the Greek property market, Alogoskoufis said: «The housing market has been quite strong and all the indications we have are that it will continue to grow strongly.» Recent data showed construction rising 18 percent year-on-year, mostly driven by housing projects, as the implementation of public infrastructure projects has been delayed. Turning to international affairs, he explained why Europe backed more voting power for China, South Korea, Mexico and Turkey at the International Monetary Fund but was less certain about the best route to deeper reform of the lender’s voting system. «The reluctance is (that) Europe in general is underrepresented in the IMF compared to some other parts of the world and we have to be really careful in negotiating changes in quotas so that Europe is not even further underrepresented.» (Kathimerini/Reuters)