EU predicts 2004 deficit at 2.4 pct

In its autumn report on EU economies, the European Commission yesterday forecast that Greece’s public deficit next year will be double the 1.2 percent of GDP predicted by the government. This prompted an urgent meeting between Prime Minister Costas Simitis and National Economy and Finance Minister Nikos Christodoulakis, where it was decided that the minister will try to persuade the Commission that it should revise its prediction. Christodoulakis said earlier that the Commission’s prediction was based on incomplete information and the assumption that spending would increase due to the elections early next year. Commissioner Pedro Solbes responded that the widening of the public deficit was alarming and he noted that there was a difference of interpretation between Athens and Brussels. He said he was ready to reconsider if the Greek Finance Ministry provided additional data. The ministry said: «The EU’s prediction for the deficit in 2004 is, in our opinion, excessive as it underestimates the effect of a higher growth rate on revenues and overestimates the additional costs of the social package. It also underestimates the influx of funds from the EU’s Third Community Support Framework.» The social package, which includes wage increases, is expected to come to some 2.6 billion euros. The Commission said strong growth of real GDP is expected to continue next year, while 2005 is expected to bring a deceleration in economic activity. In 2004, real GDP is projected to rise by 4.2 percent but is expected to decelerate to 3.4 percent the following year as the stimulus provided by Olympic construction projects will wane. Consumer price inflation is expected to remain high, at 3.7 percent in 2004, easing to 3.4 percent in 2005. Unemployment for 2003 is expected to stand at 9.5 percent. New Democracy’s shadow finance minister, Giorgos Alogoskoufis, commented: «Another report by the European Commission constitutes a blow to the government’s economic policy. Despite its diplomatic language, it stresses the derailing of public finances and the persistence of inflation and unemployment at the highest levels in the EU.»