Almunia calls for Greek vigilance

Greece may have been released from European Union fiscal supervision earlier this month after running excessive budget deficits in the past but the European Commission yesterday reiterated the need for vigilance in the future and stated that it would prefer the government adopt measures of a permanent character for fiscal stabilization. In its report on the eurozone economies, presented by Economic and Monetary Affairs Commissioner Joaquin Almunia in Brussels yesterday, the Commission pointed out that in 2006 Greece’s public deficit fell to 2.6 percent of gross domestic product (GDP), mainly with measures of a permanent character but also using some temporary measures corresponding to 0.6 percent of GDP. Greece was found to have run deficits far in excess of the EU cap of 3 percent of GDP for a number of years before 2004. Regarding the public debt, the Commission reports that it is being gradually reduced toward the reference target of 60 percent of GDP, from the 110 percent average in the 2001-2005 period, to 104.5 percent in 2006, and is projected to fall to 97.6 percent in 2008 and 91.25 percent in 2009. For 2007, the Commission forecasts that the public deficit will drop to 2.4 percent of GDP, mostly with measures of a temporary character, such as a 0.25 percent of GDP reduction in public expenses. But it sees a rise to 2.75 percent in 2008, on the assumption that there is no change in economic policy. Almunia’s report proposes broadening supervision of all eurozone members to establish more efficient control of their public finances. The report contains four series of proposals designed to promote this aim, without amounting to a revision of the Stability Pact. In the first series, Almunia proposes a transition from the present focus on the «final product,» that is, the deficit figure, to greater attention of the «internal and external imbalances… that may put at risk fiscal and economic stability.» In the second series, the Commission proposes an improved management of the reactions that usually accompany all attempts at fiscal rehabilitation, including «the closer participation of national parliaments and other government agencies in the drafting and monitoring of programs.» Furthermore, the Commission should be provided with more data on how each government intends to achieve its targets, particularly regarding how it intends to contain expenses, in order to facilitate its «evaluation of national fiscal policies.» Finally, Almunia proposes improving the monitoring of the execution of fiscal programs of member states, with a clearer identification of those elements that would facilitate tackling the problem in the long term of the aging population – the foremost threat to the fiscal and economic health of European economies.

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