Deficit headed for increase

The government will not take into account some 2.5 billion euros of revenues from existing tax debts in this and next year’s budgets, Finance Minister Giorgos Alogoskoufis said yesterday, in a sign that Brussels may reject the one-off fiscal measure currently under review. Alogoskoufis said that the 2005 and 2006 budgets will not count on securitization revenues, the anticipated collection of outstanding tax debts, unless the green light is given by the EU’s statistical arm, Eurostat. «Because talks between Eurostat and the Greek services are not yet complete, the government has decided that the budgets of 2005 and 2006 will not include these revenues,» Alogoskoufis said yesterday as he briefed journalists on the outcome of a meeting of EU finance ministers in Brussels late last week. The lack of some 1.5 billion euros for this year’s budget means that the deficit is seen as hitting 4.4 percent of gross domestic product (GDP) rather than the previously estimated 3.6 percent target. The accounting tool of securitized revenues included in the national budget has been under scrutiny by the European Commission, which rejects one-off budgetary measures. EU Economic and Monetary Affairs Commissioner Joaquin Almunia said last week that a final decision on the issue is expected later in the year. The government’s announcement was intended to remove an element of uncertainty hanging over the draft budget, which will be submitted to Parliament on Monday. The lower revenues for next year will mean tighter state spending, which could have a negative impact on the country’s strong growth rates. In response to the news, PASOK criticized the state’s economic policy by saying that it is in tatters and that the economy is paying for the conservative government’s own political woes. Alogoskoufis stressed that the reduction of the deficit in 2006 will be achieved, for the most part, by structural reforms of a permanent nature. Greece has promised the EU that it will bring down its budget deficit next year to below the 3 percent limit, more specifically to 2.6 percent of GDP.

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