Economy’s three thorns

The central bank has issued a warning regarding Greece’s competitiveness and called for immediate structural and fiscal measures to deal with the economy’s three major problems: inflation, unemployment, and the current accounts deficit. In his interim report on monetary policy, Bank of Greece Governor Nicholas Garganas said that the economy is expected to grow by 3.4 percent of GDP this year, down from the 3.8 percent that had been forecast. Greece, with Ireland, will still have the strongest growth in the EU, thanks mainly to EU funds, Olympic Games preparations, infrastructure projects and the stability arising from Greece’s entry into the eurozone. But inflation has remained above the eurozone’s average and is projected at 3.6 percent this year. Unemployment remains high, despite a downward trend. The current accounts deficit continues to widen, reflecting structural weaknesses. The Bank of Greece noted the problem posed by the high public debt, in conjunction with negative demographic expectations, and proposed limiting primary state spending. It said that in 2002 there was a relaxation of the effort to achieve fiscal reform in the runup to Greece’s entry into the eurozone. It noted that in 2000-2002, the budget deficit was reduced by 0.8 percent of GDP, well below the 2.3 percent forecast. Inflation in the eurozone is currently over 2 percent, but it is expected to drop gradually below 2 percent in 2003. Greece’s entry into the eurozone is estimated to have added 0.5 percent to inflation in 2002, the central bank said. The government and the opposition New Democracy party clashed in Parliament over the budgets of past years, which Eurostat, the EU’s statistical service, has revised, revealing a 1.2 percent of GDP deficit in 2001 where the government had recorded a small surplus. On Monday, a State Audit Council report suggested that the deficit should have shown a further 3.9 percent. Responding to New Democracy party claims that recent years’ budgets were fabrications, National Economy Minister Nikos Christodoulakis slammed the State Audit Council, whose job it is to monitor the legality of state spending. «Every institution has to keep within the limits of the Constitution and to describe facts as they are and not as these neophytes, who consciously or unconsciously suggest political purposes, would like them to be,» he said.

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