Deficit deal in sight

The European Commission yesterday proposed giving Greece until 2006 to lower its deficit below the eurozone limit but urged the government to rigorously implement its 2005 budget measures. Greece had only been allowed until the end of this year to reduce its deficit from an estimated 5.5 percent of GDP for 2004 to below 3 percent – the ceiling set for eurozone members – or face possible fines. However, the Commission accepted that a «sizable adjustment» was needed and suggested that Greece be given until the end of next year to «create the conditions for a balanced and lasting correction» to its excessive deficit. The EU executive estimates that only a 1.9 percent deficit reduction is achievable this year. The proposal will have to be approved by EU finance ministers on February 17. Greece will then have to provide progress reports to the Commission every six months, starting on October 30. The government, however, will have to submit by March 21 a plan detailing how it intends to achieve its deficit-cutting targets. The Commission urged the government to strictly enforce the proposals in its 2005 budget but did not ask that any extra policies be adopted. The Commission also warned that Greece’s growth rate this year is likely to be below the 3.3 percent of GDP Brussels had initially forecast. The Greek forecast is 3.9 percent.