Ecofin on course to OK Greek exit from fiscal supervision

The European Union’s Economy and Finance Ministers’ Council (Ecofin) on Tuesday is expected to approve Greece’s revised Stability and Development Program (2007-2009), essentially certifying its ability to put its public finances in order and keep its budget deficit to below the required cap of 3 percent of gross domestic product (GDP). The approval will be a major step toward the lifting of the regime of fiscal supervision under which the country was placed in 2005. Ecofin is also expected to acknowledge that Greece has made significant progress in reducing its public debt and putting its public finances back on sound footing, but will also stress the need for progress in reforming its ailing social insurance system. Economy and Finance Minister Giorgos Alogoskoufis has said the regime of fiscal supervision will be lifted either around May-June or in September. The council is seen as expressing a positive view of the attainment of the target of a public deficit of 2.6 percent of GDP in 2006 that was set in the last Stability and Development Program (2005-2008), and of the introduction of measures that increase revenues on a permanent basis. For 2006 in particular, Ecofin is expected to note that the fiscal adjustment was, after all, much greater than was initially thought necessary, as the 2005 deficit came to 5.2 percent of GDP, instead of 4.3 percent. The 2007-2009 Stability Program foresees the maintenance of growth rates at an average of 4 percent annually. Inflation is projected to keep falling to an average of 2.8 percent, and unemployment to 6.5 percent by 2009. Exports are forecast to keep rising, 6.5 percent this year, 7.3 percent in 2008 and 7.6 percent in 2009. The public debt is forecast to end at 1.2 percent in 2009.