ECONOMY

Fiscal solution plan ready, says gov’t

Economy and Finance Minister Yiannis Papathanassiou said yesterday spending cuts will help the country improve its fiscal health, a day after the European Commission urged the country to lower its budget deficit by the end of next year. In recommendations to be submitted for approval from European Union finance ministers, the bloc’s executive branch called on Greece on Tuesday to undertake «permanent expenditure restraint.» «Our country has a plan that will be implemented with determination and will include achieving fiscal order, cutting state expenses and waste and at the same time boosting the real economy and those that need it most,» said the minister. The European Commission, the EU regulator in Brussels, urged a correction of Greece’s deficit by 2010 and called for «bold structural reforms.» »In view of… macroeconomic imbalances and the ongoing repricing of risks in the financial markets… as well as the size of the required adjustment that is relatively small, a rapid correction of the deficit by 2010 seems appropriate,» it said. The EU forecasts the Greek economy will expand 0.2 percent this year, compared with a projected 1.9 percent contraction for the euro area as a whole. Greece’s budget shortfall will amount to 3.7 percent of gross domestic product this year and 4.2 percent in 2010, above the EU ceiling of 3 percent of GDP, according to EU forecasts. Nations that breach the deficit limit can be subject to economic sanctions, though none has been fined so far. The Commission has said it would follow EU rules in starting disciplinary steps against countries exceeding the 3 percent limit, but would be flexible in setting deadlines for reining in the gaps because of the severity of the crisis. Once the recommendations receive the support of EU finance ministers at their informal meeting on April 3-4 in Prague, the five countries – including France, Spain and Ireland – will have six months to specify what measures they intend to take to reduce the deficit.