Spending cut to help budget woes

As the Greek economy starts to feel the pinch of the global economic slowdown, the Finance Ministry is expected to tighten its budget expenditures in an attempt to meet 2008 goals threatened by lower-than-expected revenues. «It is a given that the government will move ahead with all of its means to implement the budget by monitoring expenses and trying to meet revenue targets,» said Alogoskoufis after meeting with Prime Minister Costas Karamanlis yesterday. Concerns are growing that Greece may miss its projected aim of a deficit of 1.6 percent of gross domestic product for 2008 as the economy is starting to show signs of fatigue, in a development that weighs heavily on budget revenues. The Finance Ministry has revised lower its growth target for the year to 3.6 percent from 4.0 percent previously, but sources say another downward revision is on the cards. On Tuesday, Alogoskoufis stopped short of promising a parliamentary economic committee that Greece will successfully implement its 2008 budget goal in a move that fueled talk that the budget is no longer on track. 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. 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 also trailed annual targets in May last year. The main goal will be to keep the deficit to within the European Union imposed 3 percent limit so there is no excessive deficit procedure launched against Greece, said a ministry source. Alogoskoufis has rejected increasing taxes this year on the grounds it would fuel inflation – which soared to nearly 5 percent last month – and also weigh on economic expansion rates. New budget goals and revised targets are likely to be announced in September, according to sources.