NEWS

Budget picture darkens

The government’s economic team is trying to solve a tricky economic riddle in its effort to execute this year’s budget in accordance with its forecasts and to prepare the budget for next year at a time when ministries are calling for colossal increases in the funds allotted to them – with some reaching 30 percent above this year’s funds. In some cases, these demands are explained as the fulfillment of promises to various categories of employees or groups of the needy, or to take care of urgent social needs. But executing this year’s budget is also turning out to be difficult. Many of the funds that had been set aside for the whole year were all but exhausted in the first half of 2003. The reserve fund of 200 million euros for dealing with emergencies is already dry. Spending in the January-May period increased by 12.3 percent, as opposed to the forecast of 5.2 percent, whereas revenues have increased by just 2.8 percent, as opposed to the target of 5.6 percent. The only way for the government to keep a fiscal balance is to increase state revenues drastically in the coming months, and this is obviously the aim of consecutive moves to collect taxes by providing new adjustments. But taxpayers – mainly self-employed professionals and small businesses – appear unwilling to close outstanding issues by paying further taxes. Immediately after the long weekend of the August 15 holiday, the government has planned a series of meetings aimed at working out a solution for next year, which will be further burdened by the cost of holding the Olympic Games. Further costs will come from the new civil servants’ wage scale (260 million euros) and another 400 million euros for back payments of family subsidies. According to sources, revenues in the 2004 budget are expected to rise by 5.5 percent, from this year’s target of 5.1 percent. Spending is expected to rise by 6.2 percent. The deficit is expected to be about 0.9 percent of GDP, from the 1.2-1.5 percent expected this year. Regarding this year’s budget, the latest figures made public showed the deficit widening by 75 percent, to 6.7 billion euros from the 3.8 billion euros in the same period in 2002. Even though the government’s economic team tries to play this down, it creates concern over these developments.