EU slams deficit efforts and calls for further action

The European Commission yesterday called on Greece to bring in more measures to lower its public deficit than it has planned in the 2005 budget, while asking EU finance ministers (Ecofin) to consider taking further disciplinary action against the country. «Greece has taken no effective action to correct its excessive deficit,» said EU Economic and Monetary Affairs Commissioner Joaquin Almunia while presenting the executive body’s report in Brussels yesterday. Greece has been in the spotlight since a review of public finances revealed larger deficit figures for all the years between 1997 and 2003 than the ones that had been submitted to the EU. In each case, the public deficit turned out to be well over the 3 percent of GDP ceiling set by the Stability and Growth Pact signed by all eurozone members. In its statement, the Commission said that «Greece’s budgetary situation had deteriorated further in 2004, despite having the highest economic growth in the euro area.» Almunia told reporters that the excessive deficit could not just be blamed on the high costs of the Athens Olympic Games. He said there had been «slippages» in spending across the board and called the government’s target of cutting its deficit to 2.8 percent of GDP by next year as optimistic, and the measures to achieve it as «insufficient.» Greece’s deficit will be 3.6 percent in 2005, the Commission judged. The action taken by the Commission yesterday is set out in Paragraph 8 of Article 104 of the Maastricht Treaty regarding the disciplinary process for EU member states with excessive deficits. The next move would be for Greece to come under closer scrutiny, as set out in Paragraph 9. This would involve the Karamanlis government having to provide the Commission with regular updates on its progress in reforming public finances. Whether this step will be taken is due to be decided at an Ecofin meeting on January 17-18. The most likely scenario is that EU finance ministers will take into account the report without moving ahead with further action, as set out in Paragraph 9, Commission sources told Kathimerini. Economy and Finance Minister Giorgos Alogoskoufis remained adamant, however, that the government could achieve its target through the «ambitious» 2005 budget which was being voted on in Parliament last night. «With the new budget, we are aiming for a reduction in the general public deficit to 2.8 percent of GDP from a projected 5.3 percent. It is a major transition and is based mainly on the control of public spending, and is aided by the fact that a very large part of this year’s Olympics expenditure will not be repeated in 2005,» said Alogoskoufis. The minister said that the Commission will announce during the first two months of next year its decision to allow Greece until 2006 to rein in its deficit below the eurozone ceiling.