ECONOMY

Deficit seen above 10 pct mark

The strong parliamentary majority enjoyed by the new government will enable it to move ahead with much needed reforms, Bank of Greece Governor Giorgos Provopoulos said yesterday, warning that the budget deficit will be considerably higher than the 6 percent mark. Speaking on the sidelines of an annual meeting of the International Monetary Fund and the World Bank in Istanbul, Provopoulos said a reform program can be combined with a growth agenda for the 250-billion-euro economy. «The broad support the newly elected government has received will help it enormously to implement a needed program of reforms,» he said. Asked about the expected level of the budget deficit for 2009, Provopoulos said it appears to be moving above 10 percent of gross domestic product. The Economy and Finance Ministry had said before Sunday’s elections that the budget deficit is projected at around 6 percent of GDP, versus a previous forecast of 3.7 percent. The Greek government last week submitted its latest estimates for the 2009 budget to the European Commission. Brussels is expected to publish its own estimates on the Greek budget and economy in the Commission’s fall report on November 3. The head of the country’s central bank added that Greece needs to take steps to boost its competitiveness in order to maintain the high growth rates seen in the past. In order to boost competitiveness and overcome problems in the economy, a long-term fiscal reform plan is needed that will help the government borrow at cheaper rates and boost private sector investments, he said. Meanwhile, two major rating agencies – Fitch and Standard & Poor’s – have said that the Socialists must cut public spending and push through long-delayed structural reforms if they want to improve the country’s credit rating and avoid a downgrade. «Whether or not the rating goes down depends very much on the trend of public finances and the government’s willingness to pursue the more difficult policy agenda,» Paul Rawkins, a senior director at Fitch Ratings, told Reuters. Rawkins said Fitch was unlikely to change Greece’s «A» rating soon, unless the new government announced public finances were much worse than previously thought when it comes to office. Economic sentiment improved ahead of elections, says IOBE Economic sentiment in Greece improved in September, rising to its highest reading since November 2008, as consumers became more confident anticipating a change in government, according to the Foundation for Economic and Industrial Research (IOBE). IOBE said yesterday its economic climate index rose to 63.8 points – from 59.2 in August and July’s 57.2. The institute said Greek consumers appeared slightly less pessimistic about the country’s finances than in the previous months and more upbeat about their households’ economic condition. Expectations also strengthened for a drop in unemployment. «The improvement in economic sentiment in September is more due to the strengthening of consumer confidence and less due to any amelioration of conditions in specific business sectors,» IOBE said. «As has been noted in surveys since 1985, election years are characterized by a systematic rise in consumer confidence as expectations improve during pre-election periods.» The economic sentiment benchmarks for the EU 27 and the eurozone rose in September to 82.6 from 81 points in August and to 82.8 from 80.8 points respectively, IOBE said. The overall index is based on business expectation sub-indices covering industry, construction, retail trade, services and consumer confidence.