2006 set as deficit target

Greece will definitely lower its budget deficit to within the eurozone limit by the end of 2006, despite the fact that the public finances are racked by serious problems, Economy and Finance Minister Giorgos Alogoskoufis said yesterday. Speaking on his return from a regular meeting of EU finance ministers in Brussels, he expressed confidence that Greece would be given a two-year extension, until 2006, to reduce its deficit below 3 percent of GDP from a projected deficit of at least 6 percent for 2004. He predicted that the European Commission would not recommend that Athens should adopt any extra deficit-cutting measures to the ones already included in its 2005 budget, which Alogoskoufis labeled «ambitious» yesterday. Despite Alogoskoufis’s proposals, as set out in the 2005 budget, for a reduction in Greece’s deficit to below the eurozone limit by the end of this year, EU finance ministers agreed with the Commission’s view that it was more likely that the deficit would reach 3.6 percent of GDP in 2005. If so, they said on Tuesday, Athens should be subject to further disciplinary measures, which could lead to a substantial fine. The next step in the disciplinary process will be for the Commission to issue Athens with a set of recommendations within the next month on how to reduce its deficit. The minister said that exactly when Greece’s deficit will be brought in line with the Growth and Stability Pact will depend largely on the performance of the economy over the next few months. He had previously forecast an average growth rate of 3.9 percent for the Greek economy this year but admitted yesterday that if growth was slower, then the deficit reduction would probably be delayed until 2006. Alogoskoufis also said that his ministry was looking into plans to scrap a series of taxes on the sale of existing buildings and replace them by adding VAT to the price of all newly built properties from January 1 next year. The VAT would be calculated on the basis of a price set in between the nominal and actual market value of the property. (Editorial Page 2, 5)