ECONOMY

Eurostat, global uncertainty derail budget, growth goals

Greece’s much-vaunted economic achievements of the last few years lost some of their shine, while previously ambitious goals for the coming years were revised downward yesterday, victims of Eurostat’s crackdown on murky balance-sheet accounting operations, and global uncertainties. Instead of a budget surplus last year, Greece posted a deficit and expects to see a fiscal shortfall to 2004 as a result of revisions to public finances made in accordance with new requirements set by the European Union statistics office, Economy and Finance Minister Nikos Christodoulakis said yesterday. Under the new rules, Greece’s budget deficit for 2000 soared to 1.8 percent of gross domestic product from an original estimate of 0.8 percent, while its much-lauded surplus last year turned into a 1.2 percent shortfall. The projected 0.4 percent surplus this year is due to become a 1.1 percent deficit and an estimated 0.8 percent surplus next year will, instead, become a 0.4 percent deficit. Eurostat’s decision to include securitization revenues in public debt also derailed the government’s hopes of improving the debt-to-GDP ratio to 90 percent of GDP by 2004. The new accounting rules jacked up last year’s public debt ratio to 107.3 percent of GDP from a previously estimated 99.7 percent. This year’s ratio is due to increase by 2 percentage points, to 105.3 percent from an earlier forecast of 103.2 percent. Tight spending controls should slash 5 percentage points off the ratio next year, bringing it down to 100 percent of GDP. «This will be the biggest cut in public debt in the last two decades,» said Christodoulakis. Apart from a tight leash on spending, he said privatization revenues, high economic growth and a curb on government loan guarantees are expected to help bring down debt next year. Citing bleak prospects for a recovery in the global economy, Christodoulakis said economic growth next year is now projected at 3.8 percent, down from a forecast of 4.1 percent issued in September. «While the Organization for Economic Cooperation and Development and the EU see a higher rate of around 4 percent for Greece, we have decided to be more cautious,» he said. Adjustments were also made to spending and revenue targets in the 2003 budget, both lowered to 6 percent and 5.1 percent, respectively, from 6.3 percent and 5.6 percent. Public investment spending, the engine for growth next year, will remain at 13 percent, while inflation is still seen at 2.5 percent. Economist Miranda Xafa said the revised budget and debt figures pointed to a loosening of the government’s fiscal policy and overoptimism regarding next year’s outlook. «The growth target is a fairly ambitious figure at a time when the eurozone is slowing down,» she said.