Budget policy losing flexibility

Greece cannot easily boost its budget revenues without upping taxes, an indication that the country is more exposed to the credit crisis than in previous years, according to credit rating agency Standard & Poors. In a report addressing the level of flexibility shown in fiscal policies adopted by European nations, countries with a lower credit rating have more leeway to increase revenues without changing their tax policy. Romania and Estonia top the list of countries with fiscal flexibility, while Austria and Belgium are at the bottom of the ranking. Greece fell three places to number 16 out of a total of 30 countries. The drop of three places is seen as an indication that Greece is more exposed to the international credit crisis. Meanwhile, data collected by the Finance Ministry last month showed that budget revenues are well below targets and the government is examining ways to get its budget back on course. Sources said the ministry may revise its 2008 targets in October as it makes plans for the 2009 budget. Revenues from value-added tax have fallen well short of expectations but income collected from customs duties is higher than expected due to rising oil prices, according to sources. 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 one year earlier. Among the options being considered by the ministry is increasing annual car registration fees and upping taxes charged on mobile phone accounts. In both areas the government can increase taxes without the risk of harming growth in the respective sector. Greece recently revised downward its targeted gross domestic product growth rate for 2008 to 3.6 percent due to a slowing world economy and rising oil prices. Sources said that a further downward revision could be on the cards in the coming months.