Bank of Greece sees solid growth

The economy will grow faster than first thought in 2005, thanks to a boost in tourism and lower-than-expected inflation, according to Greece’s central bank, which warned yesterday about the erosion of the country’s competitive standing. In a keenly watched report on the economy, the Bank of Greece’s interim paper revised upward its growth estimate of the economy this year to 3.5 percent of gross domestic product (GDP) from its previous 3 percent forecast in April. Among the factors on the economy’s positive side is the better-than-predicted inflation figures, despite record high oil prices. The central bank stressed that there is considerable room for improvement, as Greece’s inflation figures remain among the highest in the European Union and are hurting its international competitive standing. «Attempts to reduce inflation need to be accompanied with wage increases that are in line with price stability,» the report said. The country’s largest union group, GSEE, was quick to react yesterday and said that the economy cannot keep growing at the expense of workers. «We reject and disapprove of the proposals of the Bank of Greece,» GSEE said. Negotiations between unions and private sector employee groups for 2006 salaries have yet to start. The public sector union group ADEDY has said that it will seek a pay hike for next year in excess of 7 percent.