26 September, 2005
Greece has repeated its pledge of lowering the fiscal deficit to below 3.0 percent of gross domestic product (GDP) by the end of 2006 in order to meet a key European Union debt-control requirement.
"The government is committed to correcting the excessive deficit by end-2006 through expenditure restraint in the public sector, measures to contain borrowing by public enterprises and entities, a broadening of the tax base and systematic efforts to tackle tax evasion," Finance Minister George Alogoskoufis said in the US capital.
"The target for 2006 is to further reduce the deficit to 2.8% of GDP," Alogoskoufis told an annual general assembly meeting of the International Fund (IMF) and World Bank at the weekend.
Greece’s economic growth was exceptionally strong in 2004, underpinned by low interest rates and strong construction activity associated with the Athens Olympic Games. Labor market conditions improved as the unemployment rate dropped by almost a full percentage point to 10.4% in the first quarter of 2005; but inflation remained above the euro-area average, thus gradually eroding competitiveness, he noted during the joint AGM.
"Growth is expected to remain robust, at 3.6% in 2005 and rise slightly in 2006, despite the high oil prices and weak economic activity in the eurozone. This robust growth performance, well above the euro-area average, is driven by private consumption and investment, exports and tourism. Structural reforms in product and labor markets underlie this performance," the minister said.
Fiscal consolidation remained one of the government’s key priorities. A fiscal audit launched in March 2004 resulted in upward revisions of the general government deficit and debt for the period 1997-2004; and the revisions have led to an increase in transparency that provides a solid basis for assessing the fiscal stance.
Significant progress has been achieved in 2005, with the deficit of the general government set to decline from above 6% of GDP in 2004 to 3.6% in 2005, Alogoskoufis noted.
In parallel with fiscal consolidation, the Greek government is implementing a wide-ranging agenda of structural reforms, to help increase private investment, employment and potential growth. The agenda includes an acceleration of the privatization process, a new legal framework for joint ventures between the state and public sectors, and reforms to increase flexibility in the labor market and in retail shopping hours.
"We are also pursuing efforts to improve the competitiveness of the Greek economy by promoting competition, reducing administrative barriers, and cutting corporate taxes while improving tax administration," Alogoskoufis noted.
"The key to strong economic performance in an environment of intense global competition is downsizing the state sector, building strong institutions, removing obstacles to the efficient allocation of resources and tackling poverty. The pursuit of these objectives is greatly facilitated by international and regional policy coordination," he said.
He welcomed the IMF's lending facilities and global, regional and country surveillance, as well as the World Bank’s country programs and lending policies as instrumental in the pursuit of the government's objectives; and praised the IMF's medium-term strategy to streamline surveillance and increase focus on the most pressing macroeconomic issues arising from globalization.
"We also welcome the Bank’s initiatives to reduce global poverty, and strongly support the Bank’s continuing presence in Southeastern Europe. We also fully endorse the attainment of the Millennium Development Goals by 2015 and the recent G-8 initiative for debt cancellation of eligible countries," the minister concluded.
Source: Athens News Agency