ECONOMY

Cabinet to debate draft 2003 budget

The draft 2003 budget will be presented to the Cabinet for approval tomorrow. According to sources, the budget surplus will fall short of the target of 1 percent of the country’s gross domestic product (GDP), as previously agreed with the European Union. Increased debt repayment demands and pressures for more spending are expected to limit the surplus to 0.8 percent of GDP. According to inside sources, primary spending will grow by 6 percent and revenues will increase 5.5 percent. Spending will, therefore, grow at almost double the rate of inflation, projected to average 3 to 3.2 percent next year. On the other hand, economic growth will reach 4 or 4.1 percent, compared to an estimated 3.8 percent this year. Public debt was recently revised upward after a decision by Eurostat, the EU statistics agency, obliging member states to include issues of share-exchangeable certificates and bonds issued against future government receipts. This decision affected five countries. In Greece’s case, it pushed total debt at the end of 2001 to 105.1 percent of GDP, from 99 percent, still the third highest in the EU after Italy and Belgium. According to the new government forecasts, the debt will be reduced to 103.1 percent of GDP in 2002 and 99.1 percent in 2003. The 2003 budget is also expected to include 200 million euros in emergency aid in case of severe weather phenomena. After submitting the draft budget to Parliament, Economy Minister Nikos Christodoulakis will take part in a very important meeting of the EU’s Economy and Finance Ministers (ECOFIN) on October 8. The meeting will discuss all member states’ budgets, deliver a warning to Portugal for its excessive budget deficit, and discuss the terms of the Stability and Growth Pact. The pact imposes sanctions to members with budget deficits in excess of 3 percent of their GDP, by withholding EU aid for infrastructure projects. It also requires each member to submit in advance, and update annually, estimates about budget surplus or deficit, debt level, inflation and growth for the following three years. Some of the larger states feel that the 3 percent budget deficit level, enshrined in the Maastricht revision of the EU fundamental treaty, in 1992, is too rigid and inappropriate at times of slowing economic growth. Germany, for example, will post a deficit in excess of 3 percent this year, because of extra spending in response to recent floods. Other countries, such as Greece, are against relaxing the target.