Reining in the public debt

The listing of the Postal Savings Bank and ATEbank (formerly Agricultural) on the Athens Stock Exchange brought more than a billion euros into state coffers. Economy and Finance Minister Giorgos Alogoskoufis must be pleased to see that the government’s privatization program has almost met its target for 2006, even before the sale of the highly valued Emporiki Bank. The revenue will go toward narrowing the public debt, which will this year reach 226 billion euros, or 117.2 percent of GDP, compared to 215 billion, or 119.7 percent last year. Curbing public debt through listings and privatizations is a Sisyphean task for the government. Soon there will be nothing left to sell and the revenues from privatizations cannot catch up with the soaring budget deficit. This year the Economy Ministry will collect between 1.7 and 1.8 billion euros from privatizations (including that of Emporiki) while the budget deficit will increase public debt by 6 billion euros. Deputy Economy Minister Petros Doukas is struggling to contain spending under the weight of public debt. «Out of 44 billion euros in state revenues from direct, indirect, individual and corporate taxes, 10 billion go toward paying interest on the public debt, 19 billion toward repaying the principal of the debt and therefore 15 remains that is barely enough to pay wages and pensions to public sector employees,» he said. «We must borrow another 3 billion to pay National Health System doctors and other hospital staff, 8.5 billion to finance pension funds deficits and another 8.5 billion to subsidize transport, to pay for state agencies’ consumer expenditure, and so on.» Breaking the deadlock means accelerating growth. If GDP increases by over 5 percent, public debt as a percentage of GDP will drop. Only then will we near the 60 percent threshold of the stability pact.

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