ECONOMY

Ecofin seals Greece’s absolution

The European Union’s Council of Economy and Finance Ministers (Ecofin) meeting in Luxembourg yesterday confirmed Greece’s exit from the regime of supervision for running excessive deficits, thus ending one of the most difficult chapters in its recent fiscal history. «This is a landmark decision which must be followed up at the economic policy level,» said Economy Minister Giorgos Alogoskoufis. He noted that Greece has achieved a spectacular reduction in its fiscal deficit over the last two years, confounding at the same time those who had predicted a collapse of the country’s growth rates after the Olympic Games of 2004, and bringing down unemployment from 11.3 percent to 8.8 percent. Greece’s fiscal deficit fell by about 5 percentage points of gross domestic product (GDP) to 2.6 percent in 2006 in the two years that it was under supervision. Both Eurogroup Chairman and Prime Minister of Luxembourg Jean-Claude Junker and Economic and Monetary Affairs Commissioner Joaquin Almunia said late on Monday that the present Greek government inherited in 2004 a problematic economy that is now back on the right footing. The lifting of supervision of Greece yesterday was considered certain after the European Union’s confirmation in the spring that the country’s fiscal deficit had receded to below the 3 percent cap of GDP last year and is projected to remain there in 2007 and 2008. What did not appear certain, however, in recent months, was that Greece’s EU partners would be convinced of this favorable development. Doubts were reported to have been raised in the meetings of the experts on the Economic and Monetary Committee, notably by the «purists» from Austria and the Netherlands, which have never had budget deficit problems. Alogoskoufis said the European Commission’s stand was decisive in dispelling such reservations, as it repeatedly provides assurances that Greek statistical data were now under full control. Alogoskoufis said attention would now be focused, as the Commission has repeatedly asked, on the issue of the country’s public debt – the second highest in the eurozone. He noted that debt servicing absorbs about -10 billion a year. «This money is missing from somewhere – from the welfare state,» he said. He added that it was crucial that the «second chance» given to Greece by yesterday’s decision be utilized productively. «There have been landmark decisions in the past, such as Greece’s entry into the eurozone, but they were followed by laxity and euphoria, with the well-known, unfortunate results,» he said. Strong euro no problem The Greek economy is growing well and the European Central Bank’s move of raising interest rates could help it to avoid overheating, Alogoskoufis said. «I think (ECB) monetary policy for an economy growing as fast as Greece is not bad, as there is always a risk of overheating,» Alogoskoufis told reporters on the sidelines of the Ecofin meeting. «We are not too concerned about the (ECB’s) stance,» he added. Alogoskoufis said the Greek economy was growing well due to private investment and exports and was not affected too much by the strong euro as most of its trade was within the 27-nation bloc. (Kathimerini, Reuters)

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