Busting the budget

The pressures created by the government’s pre-electoral promises of handouts and the excessive spending for the Athens 2004 Olympics are threatening to derail public finances. Sources say that accounts watched over by the Bank of Greece are showing a deficit equal to 5.5 percent of GDP for the eight months between January and August this year, compared to 2.6 percent over the same period last year. The same sources say that at general government level over the same period, the deficit comes to 4.6 percent of GDP, compared to 1.9 percent last year. These figures suggest that the general budget deficit will exceed the forecast of 0.9 percent of GDP by far. Officials at the General Accounting Office are concerned over how they will end the year and hope the deficit will not exceed 1.5 percent of GDP, if the apparent surpluses of public corporations and organizations are included. But these are determined almost arbitrarily and involve considerable creative accounting. The situation is worsened further by the galloping costs of the Olympic Games, which exceed even worst expectations. Finance Ministry officials estimate that Games expenditure will go over 10.5 billion euros. Prime Minister Costas Simitis has called a meeting of a broad spectrum of officials to discuss the issue today and to look for ways to finance Games spending. The European Investment Bank has already provided a loan of 1.5 billion euros and, in the first eight months of this year, some 2.7 billion euros, or 88 percent of the Public Investment Program, has been spent on Olympics preparations. Among the options being considered is for Hellenic Tourism Properties (a state company) to take out a 300-million-euro loan. In this way, the costs can be held over to the budgets of 2005 and 2006, with all that this will entail for the post-Olympic era. Another possibility is for Hellenic Tourism Properties to buy Olympic facilities, such as the broadcast center, so that the public debt will not be burdened further. As for Games preparations financed by the Public Investment Program, an extra 1.5 billion euros is needed, over and above the official government limit of 4.4 billion euros, which was exceeded long ago without this ever being acknowledged.

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