ECONOMY

Commission urges caution

BRUSSELS – The European Commission will ask the government to implement its economic program as is, «following the good progress achieved since 2004,» with the aim of eliminating the budget deficit, moving to high surpluses for long periods and diminishing public debt, in a report to be published today. The regular evaluation report on the Greek stability program for the next three years will include three recommendations to Athens: The implementation of the forecast adjustment to the medium-term target, which would reduce the deficit to zero if possible in 2010, or by 2012 at the latest, the continuation of tax reforms and an improvement in the long-term viability of public finances, primarily by pressing ahead with the reform of the social security system. For Brussels, Greek public finances remain in the «danger zone,» given population aging and the dramatic deterioration of the balance between social security contributions and the social expenditure which aging entails. Therefore, the reports notes, despite the progress achieved, it is of paramount importance for fiscal rehabilitation to keep primary spending under control and to improve the efficiency of public expenditure. Similarly, inflation must be tamed, as «it is leading to a loss in competitiveness and a deterioration of external balances,» which if allowed to continue, «could put at risk the real convergence of the Greek economy with the other European ones.» The Commission estimates that the deficit for 2007 came to 2.9 percent of gross domestic product, against a target of 2.7 percent, and notes that the final reduction of the structural deficit by about 0.5 percent of GDP is smaller than what the EU had required in a similar evaluation last year.