Doubts on Greek program

The European Commission and the Bank of Greece (BoG) are disputing the targets and forecasts of the government’s revised stability program. The competent agencies in Brussels are about to complete the evaluation of the program, which will be integral to the Commission and Ecofin’s decision on whether to instigate new supervision of the Greek economy by the European Union. Sources suggest that this evaluation will clearly state that there is great danger that the program’s targets will not be met. The Commission has clearly stated that it considers the Economy Ministry’s scenario as «optimistic» and disputes the ability of tax-collecting mechanisms to reap an additional 6.5 billion euros amid a financial crisis. It views the recent tax measures as jeopardizing the containment of public spending, as well as noting that there are no new measures for the last two years of the program (2010 and 2011). Today the council of eurozone economy ministers will discuss Greek public finances, which will allow minister Yiannis Papathanassiou to test the waters regarding any possible decision on the supervision of the country’s economy. The Bank of Greece, for its part, will issue its report on monetary policy tomorrow and is expected to warn of the risks to the economy as reflected in the increasing spread between Greek and German bonds. It is also set to forecast growth to drop to 0.5 percent in 2009, against the 1.1 percent the government expects, and core inflation to fall at a rather slow rate. This is why the BoG will call for contained salary raises and a more effective reduction in public spending.

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