ECONOMY

Plan outlined for return to growth

The Finance Ministry is putting together an ambitious but achievable fiscal reform plan in a bid to send the European Commission and investors a message that it can make up this year’s budgetary fallout. Based on the plan, the deficit will be reduced by 2.4 percent of gross domestic product in 2010 and by a further 2.2 to 2.5 percent of output in the years that follow. This year’s deficit will come in at 12.5 percent of GDP but the government is hoping to lower it to 9.5 percent next year. The fiscal shortfall is expected to automatically drop by 1.6 percent next year due to one-off expenses recorded in 2009, such as debts owed to hospitals, recently privatized Olympic Air and outgoings arising from the European and national elections. This means the deficit will automatically drop to 10.9 percent of GDP, however, the benefit will be partially offset by measures aimed at helping put the economy back on a path toward growth. The growth package is estimated at 2.5 billion euros, or 1 percent of GDP. European Union Monetary Affairs Commissioner Joaquin Almunia is said to have opposed in Luxembourg last week Greece’s plans for the 2.5-billion-euro package, arguing that the deficit cannot be further widened. However, the Finance Ministry appears determined to push ahead with that particular program on the grounds it will help the economy to recover swiftly. Germany’s recent decision to place recovery above fiscal reforms adds weight to Greece’s argument. Therefore, the European Union’s largest economy will follow the same policy as Greece in a development expected to ease pressure on Greece to drop the plan. Of course, the two economies’ progress should not be compared, as the deficit in Germany has risen due to the crisis while it has been increasing in Greece in the last few years due to deep structural weaknesses.