Greece may get 2 years to cut deficit

Despite revealing yesterday that its public deficit was higher in the buildup to adopting the euro than the limit set by the EU, Greece looks certain to avoid any sanctions and may be given a two-year deadline to bring its finances in line with eurozone rules. «It has been proved that for none of the years from 1999 onward was the deficit below 3 percent,» Finance Minister Giorgos Alogoskoufis admitted. Greece joined the eurozone in 2001 and signed the Stability Pact, which stipulates that the public deficit cannot exceed 3 percent of GDP. A self-imposed government audit of figures from 2000 to 2003 led to a revision of Greek public finances by the EU’s statistical body, Eurostat, and the assessment that the deficit had been above the EU limit for each of those years. Although it was expected that an October visit by Eurostat officials to Athens would result in an upward revision of deficit figures from 1997 to 1999, most assumed these would still be within the limit prescribed by the EU. Alogoskoufis’s statement to the contrary came only hours before he flew to an Ecofin meeting in Brussels. «We have a crucial meeting today where the data relating to past deficits will be cleared up. The next step will also be discussed, which has to do with how Greece will keep its deficit below 3 percent,» said Alogoskoufis. Economic and Monetary Affairs Commissioner Joaquin Almunia informed ministers at the Ecofin meeting last night that Greece’s deficit figure for 1999 had been revised to 3.38 percent of GDP, 4.13 percent for 1998 and 6.44 percent for 1997. The matter is expected to be discussed further during today’s talks. The figures were included in an interim report by the European Commission. A final report is expected within the next two months, when the matter is also likely to be put to bed. It seems that the Commission had not foreseen such a situation and is powerless to hand out punishment. Greece’s adoption of the euro is, therefore, not being questioned. «There is no possibility of going back on that. There’s no legal basis under which that could be questioned,» said Commission spokesman Gerassimos Thomas. EU officials could refer Greece to the European Court of Justice for its poor cooperation with Eurostat, but this option also seems unlikely. In fact, the Commission may view that as a counterproductive move as, in its interim report, it applauds Alogoskoufis for launching the original audit. It also seems likely that Greece will have an additional year to bring its deficit in line with the Stability Pact. The projected deficit for this year is about 5.5 percent and, in his draft budget, Alogoskoufis proposed to cut it to 2.8 percent by the end of next year. However, the Commission regards this aim as unrealistic and may be willing to allow Greece until 2006 to achieve this goal.