Deficit forecast upped to 6 pct

Greece’s public deficit, which has proved such a thorny issue in recent months, will close out this year at 6 percent of GDP rather than the 5.3 percent forecast, Deputy Economy and Finance Minister Petros Doukas said yesterday. Greece is already in hot water with the European Commission over its deficit figures shooting above the 3 percent of GDP eurozone ceiling. Doukas put the higher figure down to low absorption of EU funds and overestimation of income from adjustments to the taxation system. Meanwhile, Fitch Ratings, the international rating agency, yesterday downgraded Greece’s long-term foreign and local currency ratings to ‘A’ from ‘A+’. The agency said there had been «virtually no progress in fiscal consolidation since Greece joined the euro area» and called for the budget to be brought under control and the pension system to be reformed. But Fitch’s assessment is that Economy Minister Giorgos Alogoskoufis’s 2005 budget plans to reduce the deficit by 2.5 percent (based on the 5.3 percent forecast) is attainable. The Economy and Finance Ministry issued a statement saying that Fitch’s report «emphasized that the Greek economy’s rate of growth in the future will be around the eurozone average, which will have a positive impact on public finances.» Alogoskoufis expressed fears yesterday that the European Commission will warn next week that his plans to reduce the deficit are not good enough. He said the matter would be discussed further at an Ecofin meeting in January, when extra deficit-cutting measures may be recommended by other eurozone finance ministers. «We will not be taking any emergency measures, we will… hope that, with the 2005 budget we have submitted, the public deficit will drop below 3 percent,» he said.