Draft budget shows rise in spending, debt

Public debt, and the sums needed to service it, keep piling up, despite the government’s commitment to movement in the opposite direction, a report finds. An analysis in Alpha Bank’s latest weekly bulletin, based on figures from the draft 2003 budget, shows that the central government’s borrowing requirements for next year will rise to 3.6 percent of the country’s gross domestic product (GDP), instead of the initially forecast 2.9 percent. As late as a year ago, the government had set its goal for lower public debt at 90 percent of GDP. This goal has been abandoned for good now, as new, revised figures show that the debt was not as low as advertised. Various accounting alchemies were exposed earlier this year when Eurostat, the European Union’s statistics agency, obliged Greece, and four other member states, to include sales of share-exchangeable certificates, as well as sales of bonds against future receipts, in their public debt. As a result, this pushed the country’s total debt for 2001 to 103.6 percent of GDP from the original 99.6 percent. It is this amended debt level that figures on next year’s draft budget. This week, Eurostat revealed that there were additional items to be added to Greece’s debt, provisionally raising the 2001 debt figure to 105.1 percent. The «provisional» refers to ongoing negotiations between the Greek government and Eurostat as to what other items ought to be included in Greece’s debt, which makes it highly likely that the level could rise even further. The Alpha Bank study observes that this further rise in debt is due to further state liabilities which, it hints, were surreptitiously hidden. The draft budget’s figures are full of revised estimates compared to earlier projections. For example, revenues next year will be lower by 333 million euros than previous estimates and primary spending will be higher by 590 million euros, thus increasing by 8.4 percent compared to 2002, instead of the expected 5.4-percent increase. Most of the extra spending will go to wages and pensions (253 million euros) and on interest payments (250 million). As if fiscal policy figures were not bad enough, Alpha’s bulletin forecasts that inflation, already the third highest in the eurozone, will rise to 3.9 percent year-on-year in November, from 3.6 percent in August, because of higher fuel prices.