Finance Ministry searching for path to recovery

The newly elected socialist PASOK government will put on hold plans from the previous administration allowing homeowners to pay a fee to exempt illegally converted areas of their property from further penalties, a senior Finance Ministry official said yesterday. The fee, which was seen adding 1.1 billion euros to government coffers this year, breaches the Constitution and the relevant law needs to be reviewed from the beginning, the source said. The Socialists, who won Sunday’s elections by more than 10 percentage points ahead of the conservatives, are putting together a plan aimed at helping get the economy on the path of recovery. The ETAK property tax will continue to be applicable for 2008 and 2009 while a law offering cash incentives to car buyers who scrap older vehicles when buying newer models will be ratified by Parliament soon, added the source. Meanwhile, Bank of Greece Governor Giorgos Provopoulos said Greece’s budget deficit has worsened but was not likely to exceed 10 percent of gross domestic product this year, compared to the outgoing conservative government’s estimate of 6 percent of GDP. «I am optimistic that [the 2009 budget deficit] will not exceed 10 percent,» Provopoulos told reporters after meeting with Prime Minister George Papandreou. Greece had targeted a budget deficit of 3.7 percent of GDP but the economy’s sharp slowdown has taken a toll on tax revenues. Economy seen contracting by 1.5 pct The economy is expected to contract by 1.5 percent this year, more than previously estimated by the outgoing conservative government, according to a senior Finance Ministry source. «The services of the Finance Ministry have informed us that they estimate GDP growth at -1.5 percent for 2009. This means recession,» said the source. Last month, the government had forecast negative growth of around 1 percent in 2009.