BoG calls for more drastic measures

Bank of Greece Governor Giorgos Provopoulos will call for measures of a permanent nature as regards structural reforms and to limit expenditures so as to reduce the country’s deficit. In his report on monetary policy to be published on Tuesday, Provopoulos has reportedly highlighted that the structural characteristics and extent of the derailing of Greece’s economy require special handling and more ambitious targets than those imposed by the European Union’s Stability Pact or those recommended by the European Central Bank (ECB). The Stability Pact provides for an annual reduction of the deficit by 0.5 percent of gross domestic product. The ECB, however, argues that the fiscal loosening of eurozone countries’ budgets, meant to tackle the recession, will require a more drastic policy, with the deficit declining by 1 percent each year from 2011 onward. Provopoulos suggested that countries such as Greece, with permanent fiscal imbalances and a great need for adjustment, must target a drop in the deficit by 5 percent in the first two years and by another 3 percent in the latter half of this government’s term. This must be achieved through permanent structural measures, two-thirds of which should concern a decrease in public spending and the rest the bolstering of revenues, not by raising taxes but by improving the efficiency of the tax collection mechanisms to assure that fewer citizens are able to dodge paying taxes.