Revision may push deficit too far

A Eurostat revision of Greece’s fiscal data is likely to push the 2007 budget deficit figure above the EU-imposed 3 percent threshold, sources said yesterday. According to initial indications, Eurostat officials, who were in Athens two weeks ago, will change the accounting treatment of some budget revenues in a move that will result in the deficit ballooning by some 700 million euros, or 0.30 percent of gross domestic product. The Eurostat revision will push the country’s deficit figure to 3.1 percent of gross domestic product from the 2.8 percent recorded by the National Statistics Service (NSS). The reason for the discrepancy is the treatment of European Union funds which were posted in 2007 but which Eurostat believes should appear in the 2006 accounts. The European Commission is likely to announce the change in October but Brussels is not expected to launch the Excessive Deficit Procedure against Greece as a result of the change, according to sources. Officials in Brussels may be more lenient with Greece this time round as the 2007 deficit consists of many non-recurring expenses, such as aid that went to victims of last year’s devastating summer fires. Economy Ministry sources have attributed the differences to «technical issues» which will be resolved by September and have indicated that the bookkeeping changes will not lead to a substantial revision of the deficit data. The news comes at a time when data on this year’s budget show revenue to be seriously behind the targets set for the year. Budget revenues in the first five months of the year rose 5.3 percent year-on-year, falling well short of the targeted 12.1 percent annual growth rate, according to the Finance Ministry. Official data showed that revenues rose to 20.43 billion euros versus 19.4 billion in the same period a year earlier. Senior government sources said the difference is due to seasonal factors, pointing out that budget revenues trailed annual targets in May last year. Greece is aiming to lower its budget deficit to 1.6 percent of gross domestic product in 2008 from a 2.8 percent deficit last year. Budget plans had been prepared on a targeted 4 percent GDP expansion rate which has since been revised downward to 3.6 percent.