C/A deficit balloons

Lower inflows of European Union investment subsidies and high spending on fuels exerted pressure on Greece’s current debt account in the first seven months of the year, when the deficit skyrocketed 75.23 percent higher, year-on-year, to 14.66 billion euros, according to data published by the Bank of Greece yesterday. Inflows from the EU budget fell 21.81 percent, from 3.17 billion euros in the January-July 2005 period to 2.48 billion, while fuel expenses were up 56.23 percent to 6.7 billion euros. The data also show net inflows of foreign direct investment of 970 million and a 13.44 percent rise in exports (not counting fuels). The downturn in EU investment subsidy inflows is directly related to the country’s fiscal stringency. The cuts instituted in the country’s investment budget as part of the drive to bring the overall deficit to within EU guidelines account for most of the difficulties in the disbursement of national resources that are supplemented by the subsidies. Swelling trade deficit The deterioration in the current account deficit was mainly due to a swelling of the trade deficit and, to a lesser degree, to a rise in the deficit of the incomes account and a fall in the surpluses of the services and current transfers balances. The widening of the overall trade deficit (including oil and ships) by 4,776 million euros was almost equally due to rises in the deficit, excluding oil and ships, the net oil import bill and net payments for the purchases of ships. Receipts from goods exports (excluding oil and ships) showed a hefty rise of 778 million euros, which, however, was more than offset by a hike of 2,084 million in the corresponding import bill. The services surplus narrowed by 342 million euros, as the result of, mainly, a 557-million-euro drop in net transport receipts and, secondarily, a 304-million-euro rise in net payments for «other» services. By contrast, net travel receipts grew by 519 million euros, as receipts rose by 432 million euros (or 8.2 percent), while payments ( travel spending abroad by Greeks) declined by 87 million euros (or 6.2 percent). During the first seven months of the year, direct investment showed a net inflow of 970 million euros, compared with a net inflow of just 15 million in the corresponding period of 2005.