The government presented yesterday the final version of the 2006 draft budget that aims to slash the deficit to below 3 percent of economic output but stops short of introducing any unpopular taxes by cutting spending and targeting tax dodgers. Finance Minister Giorgos Alogoskoufis said that Greece will aim to lower the deficit next year to 2.6 percent from 4.4 percent in 2005. «With this budget, we are continuing to deepen our reform efforts, strengthen growth and the climate of budgetary discipline,» the minister said. The challenging task of lowering the deficit to below the European Union’s 3 percent limit will require the conservative government to tidy up spending at ministries and state companies and fight a massive black economy that operates tax-free. The European Commission, however, does not share Greece’s optimism. In its fall outlook, it predicted that Greece’s deficit next year will hit 3.8 percent of output. Such a development would subject Greece to sanctions. On the growth front, Greece looks set to remain among the EU’s outperformers. The government sees the economy expanding by 3.8 percent in 2006, slightly more than this year. The tight fiscal policy will also bite into the pockets of civil servants, who can expect a pay hike next year that will only be around inflation levels. «We will give the highest possible increase which will be in line with the budget,» Alogoskoufis said. In response to the news yesterday, the country’s largest umbrella union, the General Confederation of Greek Labor (GSEE) described the budget as amounting to a public confession by the government of its failing economic policy and reiterated that a strike has been called for December 14.