Debt exceeds forecast

The ballooning public debt is seriously hindering the government’s room to maneuver and could lead to further problems in light of the European Commission’s intention to review the Stability and Growth Pact in order to place greater weight on the criterion of public debt. Deputy Economy Minister Petros Doukas yesterday revealed that the borrowing program for this year is expected to hit 36 billion euros, way over the budget forecast of 29 billion. The government’s handling of the debt is limited by the fact that it is a member of the EU and one of the 12 countries in the eurozone and therefore under greater pressure than others to control its finances. Next week, the Commission is to launch warning procedures against Greece, Cyprus, the Czech Republic, Hungary, Malta, Poland and Slovakia for allowing their deficits to swell beyond the 3 percent limit set by the Stability Pact. Greece will be told to improve its finances from next year, Agence France-Presse quoted an EU source in Brussels as saying. The newly admitted EU members would be given several years to adjust, the source said. One of the basic reasons for the surge in Greece’s borrowing requirement is the last-minute construction of Olympic projects, which has resulted in greater spending without control or complaint. These extra costs had not been included in the 2004 budget, Doukas said. The further spending is covered by an increase in borrowing as state revenues remain weak. At the same time, many categories of civil servants are pressing for «Olympic bonuses» without it being certain whether all of them can be satisfied. Doukas said that the bonus will be given to the security services, in other words, the police, fire brigade and coast guard. These 60,000 people will receive, in installments, bonuses of up to a total of 2,500 euros. Finance Ministry figures show that in the first five months of 2004, the public debt rose 15.6 billion euros, reaching 193.44 billion at the end of May, from 177.8 billion at the end of 2003. The target for the end of 2004 was to keep the debt to 183 billion euros. The discovery of this debt in the audit conducted after the March elections, and the fact that the Treasury was empty, resulted in the borrowing of some 6 billion euros over a period of 45 days.