ECONOMY

Gov’t sees exit from EU regime of fiscal supervision by autumn

Greece is determined to stick to its strict, deficit-cutting fiscal policies this year, aiming to exit the EU’s supervision by early autumn, Deputy Finance Minister Petros Doukas said yesterday. Greece has been under the EU’s excessive-debt-monitoring procedure since revealing it under-reported the size of its budget deficit to Brussels for years, including in 2001 when it joined the eurozone. Doukas said he was confident the government would bring the deficit well under the EU’s ceiling of 3 percent of GDP and that its efforts would be rewarded by Brussels. «We expect to exit the excessive deficit procedure by early autumn,» Doukas told Reuters in an interview. Tight state spending and increased tax revenues, as well as sell-offs of burdensome state firms, have helped reduce the budget deficit to an estimated 2.6 percent of GDP in 2006 from 5.2 percent in 2005. The government, whose term ends in March 2008, aims to achieve a balanced budget by 2012. It has faced strikes and heated street protests against its economic policies. Doukas said incomes policy will remain tight this year, with state workers getting pay rises of slightly above the inflation rate, which was at 3.3 percent annually at the end of last year. «The numbers will be announced in February but they will be somewhat above inflation. So the policy of tidying up continues,» he said. «We need to continue this policy, both on the regulatory and on the fiscal front.» State workers were given an average 3 percent pay rise last year, below the 3.2 percent annual inflation rate. Private sector collective wage negotiations usually take a lead from state wages policies. Doukas said the conservative government, which ended an era of Socialist rule when it took power in 2004, would continue its structural reforms, efforts to open up markets and sustain economic growth. Brussels has applauded Greece’s fiscal progress but has criticized it for not moving faster on structural reform. Greece has one of the highest GDP expansion rates in the eurozone, seen at over 4 percent in 2006, but unemployment was relatively high at 9.2 percent in 2006, compared to the 8 percent eurozone average. Athens surprised its EU peers in September when it announced it was reviewing its economic output to include the black economy, revising GDP upward by 25 percent. The move is pending Eurostat’s approval and Greece has continued to report its budget and all key indicators under the original GDP figures, but Doukas said he was confident the EU statistics agency will clear the revision. «We expect it will be approved some time early in the summer,» he said. «We are apparently providing satisfactory answers to all the questions. I have not seen any major issues pop up.» Privatization agenda on track Strong foreign interest has emerged in OTE’s privatization and a stake in the dominant Greek telecoms firm should be sold to a strategic investor by June, Doukas said. The OTE sale tops Greece’s 2007 privatization agenda, aimed at paying down debt and boosting competitiveness. The state has about 38 percent of OTE and wants to sell up to 20 percent, preferably to a European peer which will participate in management. «It appears that there is strong interest from both operators and private equity funds in Greece, the Arab world, Europe and North America,» Doukas said. The government hopes to have officially launched the process by the end of April and to finish the sale by the end of June, he added. OTE CEO Panayis Vourloumis has said the June deadline was tight but achievable. OTE workers have staged strikes and street protests against the privatization. «OTE is the top privatization for 2007,» Doukas said. «We want to have come out by the end of April and say officially, this is how we are selling, to be at an advanced state in the process.» Telekom Austria confirmed yesterday it was looking at OTE. Bankers have indicated that European telecoms companies such as Deutsche Telekom and Vodafone have also expressed interest. Telefonica has denied reports it was eyeing the OTE stake. Credit Suisse, UBS and EFG Eurobank have been picked to advise on the sale. Doukas said Greece was attractive for foreign investors because of its economic growth levels and proximity to the Gulf. «There are opportunities here. This is not a saturated market and we are the EU country closest to the Gulf region,» he said. «Our economic growth rate is over 4 percent.» Timing good for banks After OTE, privatizations in the banking sector will follow, with further stakes of ATEbank and Post Savings Bank (TT) also coming onto the market. «One more stake in ATEbank and one more stake in TT, of about 15 percent, should be sold by September,» he said. Analysts say the timing is good for privatizing Greek banks, which have seen profits rise steadily on the back of rapid household credit expansion and an increased presence in southeast Europe’s growing markets. Last year’s privatization agenda was dominated by the sale of a stake in the fifth-largest lender Emporiki Bank to France’s Credit Agricole, a significant help in raising cash to reduce public debt. Greece also sold a 7.2 percent stake in ATEbank as part of its -1.65 billion privatization agenda, raising -328 million via private placement. The government now holds a direct stake of about 55 percent of TT after its successful flotation last year. Greece says its debt, one of the highest in the eurozone as a percentage of GDP, is expected to come down to 100.1 percent of GDP in 2007 from a projected 104.1 percent in 2006. The government has also said it will privatize ports and Athens International Airport, among other state assets, this year, but Doukas said ports were on the back burner. «No decision has been made on if, how or when,» he said. (Reuters)