The European Commission yesterday launched an «excessive deficit procedure» against Greece and warned that to keep today’s relatively high growth rate, the country will have to fix its public finances. With a deficit of at least 3.2 percent of GDP, Greece is in violation of the Stability and Growth Pact and with its decision yesterday, the Commission urged the EU governments to begin the necessary procedure against Greece. This is an instruction to the Greek government to bring the deficit to below 3 percent of GDP by 2005 at the latest and then ensure its gradual elimination. To achieve this, the text of the decision notes, spending must be cut by 1 percent of GDP this year. The government must take whatever measures it considers sufficient to achieve this. «The high level of debt and its slow pace of reduction are a cause of concern, especially in a period of high nominal growth and widening positive output gaps. The Commission is therefore recommending to the Council to decide on the existence of an excessive deficit and to make recommendations to the Greek authorities with a view to bringing this situation to an end. The Commission’s recommendations are expected to be adopted by the ECOFIN council of July 5. The Greek government should take action regarding corrective measures by 5 November 2004,» the Commission said. National Economy and Finance Minister Giorgos Alogoskoufis blamed the fiscal situation on the former PASOK government. «The government… is restoring the country’s credibility, applying the program for development, employment and social cohesion and moving toward adjusting the public deficit,» he said. Joaquin Almunia, EU commissioner for economic and monetary affairs, noted that the appearance of such a deficit at a time of economic growth was the result of Greece’s «pro-cyclical fiscal position,» implying the uncontrolled spending and tax breaks that stemmed from the the pre-election period. There is still a danger of the deficit being revised upward, which would demand even greater spending cuts. The final audit is expected in September.