New deficit deadline due today

As EU finance ministers prepare to confirm today that Greece will be given until next year to lower its deficit to within eurozone limits, the economic and monetary affairs commissioner said the government has a very big task ahead of it. Joaquin Almunia made the comments on the sidelines of a Eurogroup meeting in Brussels. He added that the European Commission had decided to allow Greece until the end of 2006 to reduce its deficit below 3 percent of GDP because it did not want to intensify the problems facing the Greek economy by forcing such a reduction by the end of this year. The Commission’s proposal is expected to be approved by the European Council of Finance Ministers (Ecofin) today. However, the government is likely to be asked to produce reports on its adjustment efforts every six months until the end of 2006 so the Commission can assess its progress. The first report is due in October this year, after Greece submits on March 21 a detailed account of its economic program for 2005. It is not likely that the government will be asked to adopt any extra deficit-cutting measures in addition to those in its 2005 budget Greece will also have to make known on March 1 its final deficit figure for 2004. Almunia said that it was possible that this would be above 5.5 percent of GDP, where it appears to be hovering currently. Meanwhile, financial analysts Pricewaterhouse Coopers forecast yesterday that Greece’s growth rate for 2005 would be 2.75 percent of GDP – above the predicted eurozone average of 1.75 percent but below the 3.9 percent predicted by the Greek government. The Commission has already warned that Greece’s growth rate this year is likely to be below the 3.3 percent of GDP Brussels had initially forecast.