EU upbeat over deficit drop

The European Commission said yesterday that Greece’s finances are improving and are on target to abide by EU rules but warned that various obstacles still stand in the country’s way. In its assessment of Greece’s updated 2005-2008 Growth and Stability Pact, the Commission said that accounting rules could throw out estimates this year for a budget deficit of 2.6 percent of economic output. «Overall, the program is consistent with the correction of the excessive deficit in 2006, provided that the envisaged adjustment is fully implemented and depending on the impact of possible further statistical revisions,» the Commission said. The measures, such as securitization – the inclusion of uncollected taxes, will need to be cleared by Eurostat, the EU’s statistical arm, according to EU Economic and Monetary Affairs Commissioner Joaquin Almunia. «We need to receive from Eurostat the statistical criteria about the adequacy of these one-off measures for the purpose of the reduction of the deficit,» he said. Brussels, however, did describe Greece’s macroeconomic scenario in the four-year program as being «a rather favorable one.» Economy and Finance Minister Giorgos Alogoskoufis has welcomed the Commission’s comments as he tries to lower the budget deficit to below 3 percent for the first time since Greece entered the eurozone in 2001. «The positive review from the European Commission on our stability pact boosts our attempts to achieve the necessary fiscal improvements,» the minister said. Greece’s conservative government has made the reduction of the deficit one of its top priorities and has embarked on a series of cost-cutting measures, coupled with moves aimed at upping state revenues. Economists, however, fear that fewer investment programs and reduced state spending will bite into economic growth. PASOK MP Vasso Papandreou said the changes to state finances have come at the cost of workers and investment programs.

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