ECONOMY

EU emphasizes vigilance on deficit

BRUSSELS – The European Commission yesterday urged Greece to give priority to fighting inflation and make an intensive effort to eliminate the budget deficit. «Greece has to direct any higher budget revenue toward further speeding up the process of consolidation, in order to attain the target of a balanced budget within the planned period (by 2010),» the Commission said in its evaluation report of the country’s Stability and Growth plan. The EU executive estimates that on the basis of Greece’s current economic program, the deficit, which amounted to 2.7 percent of gross domestic product in 2007, will be eliminated in 2011. According to the Stability and Growth plan submitted by Athens at the end of last year, the budget deficit will decline to 1.6 percent of GDP this year, 0.8 percent in 2009 and zero in 2010. Thanks mainly to the economic growth rate, expected to remain steady at 4 percent throughout this period, the government projects revenue to rise by 2.3 percent, while expenditure is estimated to fall by 0.3 percent. «It is necessary to deal with the issue of the long-term viability of public finances,» given the projected population aging which has taken Greece to the top of the list of countries at high risk of bankruptcy in coming decades, particularly if there is no spectacular reduction soon in the public debt. Given these factors, Greece is urged to ensure strict implementation of the 2008 budget and the elimination of the deficit by 2010. The Commission also cautions that if developments fail to confirm expectations, additional measures may have to be taken. Greece is also urged to press ahead with the current tax reforms and persist in its efforts to improve public finances by increasing the effectiveness of primary spending. Finally, Athens is asked to prepare «as soon as possible updated forecasts of spending related to the aging population.»