Budget deficit triples

On the day the Finance Ministry revealed that the state budget deficit for the January-September period was nearly triple that of the same time last year, European Central Bank Vice President Lucas Papademos issued a strict warning regarding the need to watch fiscal policy and the public deficit. Speaking at a ceremony commemorating the 75th anniversary of the founding of the Bank of Greece, of which he was governor before moving to Frankfurt, Papademos called on eurozone nations to curb public deficits, which under eurozone rules should not exceed 3 percent of GDP. «There is an urgent need for substantial and timely corrective measures,» he said, stressing that «sound public finances are necessary for supporting a stability-oriented monetary policy over the medium and longer term.» Germany, France and Portugal have exceeded the 3 percent threshold. Papademos stressed with regard to Greece that improving long-term development can be achieved only through structural reforms, an increase in productivity and flexibility in labor and goods markets. The Finance Ministry announced that in the nine-month period from January to September the general state budget deficit had ballooned by 272 percent, rising to 6.5 billion euros from 1.7 billion in the same period last year. Revenues rose by 3 percent, against a forecast of 5.1 percent. Over the same nine months, state spending rose by 9.7 percent, against a target of 6.4 percent. Also, interest for servicing the public debt was running at more than double the forecast (5.8 percent against 2.4 percent). The public sector borrowing requirement in the first nine months came to 9.4 billion euros, from 4.5 billion a year earlier. A serious problem for the budget is the difficulty in absorbing EU funds, which is reflected in the Public Investments Program (PIP). In the nine-month period, inflows from the EU came to 947 million euros, 56.2 percent less than the same period in 2002, when they were 2.1 billion euros. The Finance Ministry has revised downward its estimate that it would absorb 4.1 billion euros, now expecting 3.2 billion euros. At the ECOFIN meeting in Brussels today, Economy and Finance Minister Nikos Christodoulakis is expected to present data to try to persuade Commissioner Pedro Solbes to revise his estimate that Greece’s budget deficit next year will be 2.4 percent, double the government’s forecast of 1.2 percent.