Gov’t sets reforms, fiscal consolidation, growth and jobs as main policy goals
Greece is determined to fix its ailing pension system and stay the course of fiscal consolidation, eyeing a balanced budget by 2010, the economy and finance minister said yesterday. Outlining the government’s main policy goals in its new term, reappointed Economy Minister Giorgos Alogoskoufis said that, along with reforms, sustaining robust economic growth and job creation will be top goals. «In the new four-year term, we will proceed with the reform of the pension system in order to make it viable,» Alogoskoufis told reporters shortly after the new Cabinet was sworn in. Conservatives prevailed in Sunday’s election, winning a fresh mandate to push on with the reforms Greece needs to catch up with its richer European partners. But their parliamentary majority was clipped to 152 from 165 in the 300-seat house. Government officials, including Prime Minister Costas Karamanlis, have said the pace of reforms needs to speed up and analysts say so far the government is making the right noises. «It is a sign the government intends to accelerate structural reforms, something financial markets expect from the new Cabinet,» said economist Platon Monokroussos at EFG Eurobank. «Reforms are needed as there are many challenges – social security is a major issue, but also making public administration more efficient and the country’s fiscal position more sustainable in the medium term.» Greece managed to improve its public finances in the last three years and shrink its budget deficit to below the European Union’s 3 percent cap, exiting the EU’s so-called excessive deficit procedure earlier this year. «We will proceed to the second phase of fiscal consolidation targeting a balanced budget by 2010,» the minister said. «Strengthening economic growth and job creation are main policy goals.» Greece has had buoyant 4 percent growth in recent years but faces challenges ahead. Unemployment has come down, but at 8.2 percent in June remains high. Inflation, stubbornly above the eurozone’s average, is undermining the economy’s competitiveness. This is reflected in the current account gap which widened to 12 percent of GDP last year and shows little sign of improving in 2007. S&P sounds bell Greece’s public debt will grow to more than four times its gross domestic product (GDP) by 2050 without a reform of the country’s social insurance system, according to a report by credit rating agency Standard & Poor’s (S&P’s) on the fiscal effects of population aging in 32 countries. Indeed, in the report, issued yesterday, Greece is projected to top the relevant list, with Japan in second place and the Czech Republic in third. In at least half the countries examined in the report, S&P says the problem will be serious as, without reforms in the pension systems, public debt will exceed 140 percent of GDP. Greece’s burden is seen rising to a staggering 435 percent. According to S&P, the burden posed by the requirements of pension systems will make fiscal deficits grow to about 20 percent of GDP by the mid 2020’s, 6 percent by 2030 and 12 percent by 2050, leading the public debt to rise to an average of about 156 percent in the 32 countries at the end of this period. (Reuters, Kathimerini) Focus on fighting tax evasion The government is preparing a bill with urgent measures to fight the extent of illegal fuel trading and tax evasion, reappointed Deputy Finance Minister Antonis Bezas said at the swearing-in ceremony at the ministry yesterday. Sources said Bezas is studying a report on illegal fuel trading and a first batch of measures will come into force before the year is out. The report includes proposals for the compulsory issuance of retail receipts by gas stations and a ban on the sale of heating oil by gas stations in the big cities. Bezas said that the prime minister’s pledges for the abolition of tax on first home purchases and the introduction of a 1 percent tax on all other property transfers will be included in a bill to be submitted to Parliament soon, before the draft budget next month. The tax bill will also include an amendment granting increases of up to 11 percent to the basic pay of 155,000 staff in the police force, coast guard and fire services, as well as to 95,000 retired officers. Bezas said the reorganization of tax inspection services was among the government’s priority aims. The bill will also include a provision waiving the requirement for consumers to have retail receipts from restaurants stamped by the owners if they are to be submitted for the 40 percent tax break. The waiver is being introduced as the business stamps of a large number of restaurants are held by their accountants and were not available when the measure was introduced on August 1.
