Forest fires will not widen budget gap

Greece’s wildfire disaster may strain its budget but will not push the deficit beyond the European Union’s 3 percent cap this year, Finance Minister Giorgos Alogoskoufis told reporters yesterday. «The fiscal improvement we have achieved is not at stake. Despite the large problems in the fire stricken areas, the Greek economy’s productive base has not been significantly affected,» he said. Before the disaster, the government was targeting a budget gap of 2.4 percent of GDP this year. Economists do not think the budget is at risk of serious derailment this year despite the strains from relief efforts and reconstruction. «We expect the government to meet the 3 percent fiscal deficit target this year, but there is no doubt the fires and the underperformance on tax revenue growth so far this year create risks on the budgetary front,» said economist Platon Monokroussos at EFG Eurobank. Another economist who declined to be named said a rise in value added tax or other indirect taxes was likely after the September 16 elections as a result of the fire damage and soft tax revenues. (Reuters)