Budget deficit worsens; more borrowing seen

The current budget deficit, that is, excess spending over revenue, reached 7.26 billion euros in the first five months of the year, according to data published yesterday by the Ministry of Economy and Finance. The figure represents a 33 percent increase from the same period in 2003. The big rise is attributed to pre-election spending as well as to budget overruns in Olympics-related projects. With the government and the European Commission both predicting a budget deficit in excess of the limits set by the Stability and Growth Pact, Greece may find itself having to make even greater savings than those mandated by the Commission earlier this week (an amount equal to 1 percent of the country’s GDP in 2004 and 0.5 percent in subsequent years) to reduce the deficit. Failure to achieve the spending cuts will require further borrowing. Government officials fear that the borrowing requirement of 38 billion euros for this year, estimated by the General Accounting Office, will be exceeded. In drawing up the 2004 budget, the previous Socialist government, deposed in the March election, had estimated borrowing requirements at 26 billion euros. The State’s borrowing has already exceeded 30 billion, leading the present government to accuse its predecessor of painting a false picture of the economy. The Socialists counter that the government has borrowed on unfavorable terms.