OECD says Greek targets ‘optimistic’

With the conservative government having recently completed its first major change of the country’s pension system, the OECD urged Greece yesterday to accelerate its reform efforts in an economic environment characterized by slowing growth. The Organization for Economic Cooperation and Development said in its two-year report on Greece that the economy will continue to outpace the European Union average but that the government’s projected growth rates were «optimistic.» «Greece has huge challenges to meet and to meet these challenges successfully there is little room left for policy mistakes,» said OECD chief economist Jean-Philippe Cotis. Greece expects its gross domestic product (GDP) to expand by 3.9 percent and 4 percent in 2005 and 2006 respectively. In contrast, the Paris-based think tank sees growth of just 2.8 percent this year, picking up to 3.2 percent in 2006. Greece has been one of the European Union’s economic outperformers in recent years, largely boosted by spending on Olympic Games related projects and helped along by EU structural funds that are now starting to dry up. This spending, however, had severe impact on the budget, with Greece racking up a deficit in 2004 of more than double the 3-percent limit allowed by the EU. In response, the state is reducing expenditures at a time when private investments are also dropping off. Regarding the country’s creaking pension system, the OECD said that radical reforms are imperative and that changes should include a scaling back of early retirement schemes. «The Greek pension system is one of the most generous and inequitable in the OECD,» the report pointed out. Legislative changes passed through Parliament last week targeted the banking sector’s pension system. The move resulted in union-led strikes that paralysed state banks for more than three weeks. On a yearly basis, Greece currently spends 12 percent percent of its GDP on pensions, or some 20 billion euros. An amount which will nearly double by 2050.

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