2004 deficit at 5.8 pct of GDP

Revenues far below the government’s own estimates will increase the 2004 budget deficit to an amount equal to 5.8 percent of Greece’s gross domestic product (GDP) instead of 5.3 percent, it was disclosed yesterday following a meeting of Economy and Finance Minister Giorgos Alogoskoufis and his deputies Adam Regouzas and Petros Doukas. Until recently, Alogoskoufis had insisted that the 2004 deficit would remain, as forecast in September, at 5.3 percent of GDP, whereas Doukas has said it might reach 6 percent. Revenues grew 5.5 percent in 2004 instead of 8.4 percent. This is attributed to a slower-than-forecast absorption of European Union funds for infrastructure projects and the disappointing results of a call to enterprises and professionals to voluntarily declare past hidden incomes. Also, the new government’s promise, before it came to power in March, to abolish the financial crimes squad (SDOE), which it had described as an agency infested with supporters of the previous Socialist government bent on harassing businesses, led to its months-long inactivity and the lack of monitoring of firms, before the government reactivated the agency. The government’s goal to reduce the deficit to 2.8 percent of GDP in 2005 remains unchanged. Although it will no longer spend money on Olympic projects, except for the upkeep of the venues, the goal has been termed ambitious by Alogoskoufis himself and unreachable by the European Commission, which has said that the forecast of 3.9 percent growth this year is too optimistic. The government hopes to bolster public revenues largely by tapping the taxable potential of games of chance, tobacco and company reserves, sources said after yesterday’s meeting of Alogoskoufis and his deputies. Specifically, the government hopes to get more revenue out of the new agreement with a private company on the scratch-ticket instant lottery «Xysto.» The government will call for bids on Xysto next week with significantly different rules and regulations than those offered by the previous government, which was accused of favoring Intralot, the lottery’s previous owner. The present government hopes that the terms of the tender will attract a greater number of bidders, especially from abroad. It is said that the government will have the winner pay a lump sum up front instead of doing so at the end of each year. The Economy Ministry will also lift the blanket prohibition, in 2002, on electronic games of chance. The lifting is mandatory, as the law goes against European Union regulations. The government wants to connect the slot machines directly with the ministry in order to receive its fair share of the proceeds. Taxes on cigarettes and other tobacco products are expected to increase significantly, especially on the cheaper brands. It is expected that the price of the cheapest cigarette packet will increase from 80 cents to 1.50 euros. Finally, taxation of company reserves and the development of state-owned property now illegally occupied by individuals are expected to bring in well over 1 billion euros in added revenues.