Debt gallops ahead
With one of the highest levels of public debt in the European Union, Greece has been borrowing money at faster rates than planned so far this year in a bid just to stay afloat and service ballooning loans. Recent data from the state accounting office show that the government has borrowed 31.5 billion euros so far in 2005, against a targeted amount for the entire year of 33 billion euros. Given the unexpectedly higher debt, the Finance Ministry now looks more likely to borrow about 38 billion euros for 2005. One of the main reasons for the overshoot in borrowing is the expiration of old debt that needs to be refinanced. Among the factors on the Finance Ministry’s side is the current low interest rate environment. Additionally, the euro has helped make Greek government bonds more attractive to the international investment community. Public debt currently approaches 200 billion euros or about 110 percent of the amount the Greek economy produces per year. Olympic Games-related spending in the last few years has added to the country’s debt woes. The Finance Ministry has set an ambitious plan to slash debt with the aid of revenues from its privatization plan. For 2005, the government has said that it expects to earn 1.6 billion euros from state sell-offs. The target looks well within reach given the healthy privatization revenues racked up so far this year. The sale of a 16.4 percent stake in state owned-lottery group OPAP last month raked in 1.26 billion euros alone. Finance Minister Giorgos Alogoskoufis has said that the public debt can be managed without any negative repercussions for social spending. However, given that interest payments already budgeted for will derive the budget of some 31.5 billion euros this year, the cost appears to be already weighing on the broader economy. Last year, 29.8 billion euros went toward interest expenses. State officials insist that the targeted reduction of public debt can still be achieved. Deputy Finance Minister Petros Doukas stresses that the only way for the state to get on top of its debt is by slashing expenditure.
