The Greek Press Today
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22 November, 2005
Prime Minister Costas Karamanlis said on Monday that the budget for 2006 would fuel economic growth and boost employment while righting economic wrongs of the past.
"The budget combines the need for a reduction in major fiscal deficits, which we inherited from the past, with our basic goal of strengthening growth, employment and social cohesion," Karamanlis told a cabinet meeting that endorsed the budget before sending it to parliament.
The government aimed to lower the fiscal deficit to below 3.0% of gross domestic product in 2006 in the mildest but most effective way possible, he noted.
"Further progress, which is safeguarded in the new budget, rests mainly on measures of a permanent nature that focus on making use of public sector real estate, containing public spending, curbing extravagance, tackling tax evasion, and lowering the public debt," the premier said.
Tax revenue was anticipated to rise due to increased use of computer cross-checks, reintroduction of regular Value Added Tax declaration, a campaign against tax evasion in the fuel and construction sectors, coupled with a major containment of public expenditure.
"The budget is a responsible answer to the country's two main challenges. Firstly to continue to free itself from the heavy inheritance of the past, that is to restrict deficits and debt; and secondly to move forward with a sense of certainty and security to a better tomorrow," Karamanlis noted.
He also reminded ministers that they shouldered the responsibility for adhering to the budget and meeting its targets, curbing non-productive spending, making the best use of real estate, reducing red tape, and laying emphasis on transparency in management and in dealings with the public.
"Before us we have major battles against chronic ills, which require team spirit and discipline concerning targets, and concerning our main policy principles, which require decisiveness, daring and dynamism," the prime minister said.
He also underlined that the government was aware of social problems, especially for more vulnerable groups including people on low pensions and wages, and the jobless.
"We have chosen to show responsibility for them, opting for policies that do not have simplistic goals that will merely sound good. Social responsibility does not mean announcing measures that sound good for a while but in the medium term work against them, work at the expense of these more vulnerable groups in the population," Karamanlis added.
The 2006 budget aims to address the three large fiscal problems in the country, Economy and Finance Minister George Alogoskoufis said on Monday.
Presenting the government’s 2006 budget, the Greek minister said the budget’s direct targets were to reduce the country’s fiscal deficit to 2.6 percent of Gross Domestic Product, to further contain public debt and to boost economic growth and social cohesion.
Economic growth will not be a secondary target but it will be strengthened further next year, Alogoskoufis stressed, adding that reforms introduced by the government so far (tax reform, labor reform, banks’ pension problem, a new investment law, joint ventures between public and private sector and a more effective combating of tax evasion) would also help towards achieving higher growth rates. The Greek minister noted that public investments would increase boosting growth in regional Greece.
Alogoskoufis said that according to the 2006 budget’s provisions, the general government’s deficit would fall from 6.65 pct of GDP in 2004 to 4.3 pct in 2005 and to 2.6 pct in 2006, raising the three-year fiscal adjustment to 4.05 percentage points of GDP, of which 3.5 points would be the result of structural changes of permanent nature.
The Greek minister said the biggest fiscal problems facing the country were its high public debt, tax evasion and overspending by the public sector. Interest spending surpassed 20 percent of the regular budget’s spending this year, absorbing 5.0 percent of GDP. Alogoskoufis said the government would work consistently to reduce spending on servicing public debt and release funds for growth and social cohesion.
Commenting on tax evasion, Alogoskoufis said revenues from indirect taxation fell to 13 pct of GDP this year from 15.3 pct in 2000 and 14 pct in 2003, a development showing an expansion of tax evasion activity, mainly in VAT and fuel taxes. This problem would be addressed to with a restructuring of finance ministry’s mechanisms and more effective cross-checking of data.
“Our policy aims to maintain dynamic economic growth and to lay the foundations for a new prospect for Greece and Greeks. We have chosen the hard road, but we are obliged to. We know this policy has a cost. It’s easy for someone to be pleasant, but the significant thing is to be useful both for today and tomorrow,” the Greek minister said.
Following are the main targets in the government's budget for 2006. The first figure in each category refers to 2006, and the second to 2005.
The budget does not contain revenue from the government's debt securitization plan, which is being studied by Eurostat, the European Union's statistics agency.
- General government deficit: 2.6% of GDP vs. 4.3%
- General government debt: 104.8% of GDP vs. 107.9%
- GDP growth: 3.8% vs. 3.6%
- Growth in private consumption: 3.2% vs. 3.2%
- Investment growth: 5.4% vs. 1.0%
- Exports (goods and services) growth: 6.8% vs. 5.0%
- Imports growth: 4.9% vs. 0.7%
- Growth in public consumption: 1.2% vs. 2.5%
- Inflation (private consumption deflator): 3.2% vs. 3.5%
- Unemployment: 9.8% vs. 10.4%
- Net revenue growth: 11.2% to 46,550 mln euros
- Expenditure growth: 4.8% to 50,190 mln euros
- Spending on interest: -1.3% to 9,600 mln euros
- Primary spending: 6.4% to 40,590 mln euros
- Growth in public investment revenue: 13.4% to 3,490 mln euros
- Growth in public investment spending: 9.1% to 8,400 mln euros
- Revenue growth from direct tax: 6.3% to 19,065 mln euros
- Growth in state sector wages, pensions: 6.1% vs. 5.8%
Source: Athens News Agency