2002 budget proposal in Parliament

The budget for 2002 will be presented to Parliament today, with National Economy and Finance Minister Nikos Christodoulakis’s first appearance in the house in his new post. It is designed to tread a fine line and to meet two targets. On the one hand, it must bring into effect measures for the social policy that Prime Minister Costas Simitis has promised the electorate and on the other, it has to achieve a surplus of 0.8 percent of GDP at the end of next year. The gross domestic product is forecast to grow at 3.8 percent as opposed to 4.1 percent in 2001, while inflation is expected to drop to an annual average of 2.7 percent from the 3 percent this year. It is predicted the deficit will be cut from 99.6 percent in 2001 to 97.3 percent of GDP next year, with government officials insisting that an easing of the public debt is among the main priorities of economic policy. The Public Investment Program is scheduled to come to 3.049 trillion drachmas in 2002, a significant rise from 2.15 trillion this year. The greatest part of the program’s funding will go toward major infrastructure projects. Meanwhile, the Organization for Economic Cooperation and Development (OECD), said in a report yesterday that it expects growth at 4 percent of GDP next year, accelerating to 4.3 percent in 2003. OECD also forecast that with international fuel prices dropping, in conjunction with the containment of wages domestically, supply-side pressure on inflation will weaken. On the other hand, it warned that pressures from domestic demand (on account of the continued fall of interest rates, the influx of funds from the EU’s Third Community Support Framework, and construction projects for the Athens 2004 Olympics) will increase and that greater rises in wholesale prices cannot be ruled out in the short term. The OECD predicted that Greece’s entry into the eurozone has offered further incentives for fiscal stability and strengthened structural changes. It added that fiscal policy has to become more ambitious in order to control primary state spending better. Once again, the organization stressed that speeding up changes in the labor and product markets would facilitate non-inflationary development and improve incomes in the medium term. Other issues at stake involve the banks’ disparate insurance status and, more subtly, which mind set will prevail. Will it be National’s past as a state-controlled bank or will it be Alpha’s private-enterprise style? For his part, Karatzas, who had envisaged such a merger at least five years ago, said that the terms nationalization and privatization are notions of the past.

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