Little room for budgetary slack
The European Commission is not expected to give Greece three years to reduce its budget deficit to below 3 percent of gross domestic product (GDP) and the government will most likely have to take additional fiscal measures that may weigh on the slowing economy. In its recently updated EU stability plan, Greece said it plans to reduce its budget deficit to below 3 percent – the limit set by the EU – by the end of 2011. The Commission is likely to recommend that Greece reduce its budget gap one year earlier, according to a source. The final decision is made by the council of the European Union’s finance ministers (Ecofin). A tighter deadline would mean Greece will need to make expenditure cuts or find additional budget revenues of between 520 million and 1.3 billion euros either this year or next, after recently announcing tax changes due to the crisis. Earlier this month, Greece upped taxes on tobacco and alcoholic beverages to lift state revenues and reinstated a tax-free limit for the self-employed to boost small businesses. The Finance Ministry expects the economy to grow at an annual pace of 1.1 percent this year versus the European Commission’s 0.2 percent forecast. Meanwhile, data released yesterday showed that Greece’s unemployment rate rose to 7.8 percent in November from 7.4 percent in October with a further increase expected in coming months. Monthly figures from the National Statistics Service (NSS) showed unemployment also worsened year-on-year as it stood at 7.6 percent in November 2007. The jobless rate in the 15 countries then sharing the euro was 7.9 percent. Greek companies, such as cooler maker Frigoglass, have already announced job cuts for this year to cope with the global downturn. Younger age groups remained particularly vulnerable to unemployment in November, with rates of 22.4 percent for those in the 15-24 age group and 10.3 percent for those aged 25-34.