EU to knock deficit measures

Greece’s plans to reduce its budget deficit during 2005 so it complies with eurozone rules are inadequate, according to a European Commission report obtained by Sunday’s Kathimerini. The Commission predicts that the deficit in 2005 will be 3.6 percent of GDP, as opposed to the government’s projection of 2.8 percent. The document, which is due to be made public in Brussels on Wednesday, also criticizes the measures taken by the Greek government to lower the deficit during 2004. On Thursday, Deputy Economy and Finance Minister Petros Doukas said that Greece’s deficit will end the year at 6 percent of GDP rather than the 5.3 percent that was forecast. Greece received a formal warning on December 1 from the Commission about accounting practices between 1997 and 2003 that led to its deficit skyrocketing above the 3 percent of GDP Stability Pact ceiling. The Commission’s new report, however, appears to confirm the claims repeatedly made by Economy and Finance Minister Giorgos Alogoskoufis: that despite the disciplinary action launched by the Commission at the beginning of the month, the government will have until 2006 to reduce the deficit to below the eurozone threshold. Last week, Alogoskoufis also predicted that his plans to reduce the deficit – included in the 2005 budget currently being debated in Parliament – would be judged as not being good enough. However, he was insistent that this would not lead to any emergency economic measures. The report also states that if Greece does not adopt sufficient deficit-cutting measures, the Commission can step in and issue another warning to the government, giving it a specific time frame in which to employ certain policies to bring the deficit in line with eurozone rules.