Deficit at nearly 3.0 pct

The 2007 budget deficit has eventually closed the year at just under 3.0 percent, leaving an additional fiscal burden of almost -450 million to be carried forward to 2008. The higher-than-expected deficit, in conjunction with a slower pace of growth, makes the achievement of this year’s fiscal targets even harder, unless additional measures are taken to boost revenues and cut spending. Latest estimates by the government’s economic staff put the 2007 deficit at 2.8 percent or 2.9 percent of the country’s GDP. The budget’s initial target was 2.4 percent, later revised to 2.7 percent as a result of extraordinary expenditures associated with last summer’s devastating wildfires, as well as a number of court-ruled compensation payments to national carrier Olympic Airlines. The closing deficit is explained by slower-than-expected growth, on the one hand, and deviations in both budget revenues and spending. With the deficit under the 3.0 percent mark set by the European Union, Greece has barely saved itself from EU action. However, the missed 2007 budgetary targets and a projectedly worse growth rate in 2008 will certainly affect efforts to reduce the deficit in 2008 to 1.6 percent, unless harsh measures are taken.