NEWS

First-half spending is out of control

The deterioration of public finances is reaching worrisome proportions, Economy and Finance Ministry officials were saying yesterday following the publication of half-year spending and revenue figures by the State Accounting Office. The need for a last-minute speed-up of Olympic venue and infrastructure construction, together with the cost of handouts made ahead of March’s general election, have sent spending spiraling out of control. Overall, it has increased 12.7 percent, much higher than the 4.9 percent target set by the 2004 budget. Primary spending, which excludes servicing of the country’s debt, has increased 16.7 percent compared to the first half of 2003. Revenues have increased by 5.8 percent, not far behind the 6.3 percent target set by the previous government in the 2004 budget, but far below the revised goal of 9.4 percent set by the present government in view of higher-than-expected deficits. As a result, the deficit for the first half of the year has soared 26 percent year-on-year, to 8.7 billion euros. This higher deficit, along with the continuing revision of public finances undertaken by the present government, and the expected reduction of social security funds’ reserves point to a 2004 budget deficit over 4 percent of the country’s gross domestic product (GDP). This will then lead almost certainly to a tougher 2005 budget, since Greece is committed to reduce the deficit by 1 percentage point of GDP by end-2005.