Greece is making good progress in a drive to lower its public debt, one of the highest in Europe, a visiting European Union commissioner said on Wednesday.
"Through recommendations, the aim is to lower the deficit and ensure the viability of the Greek economy," Joaquín Almunia, the European Union's commissioner for economic and monetary affairs, told reporters "So far, progress is good."

Speaking after a meeting with Finance Minister George Alogoskoufis, the commissioner noted that Greece would send the EU a report on performance of the national economy in 2005 and the outlook for 2006.

"The report will be evaluated and we will reach our own conclusions. I cannot pre-empt the outcome of talks between the finance ministry and European Union," Almunia said. "I hope that things will go well in 2006, and that the public debt will be below 3.0% at the end of that year."

The commissioner also reported that cooperation had been close with the finance ministry over the last 18 months, and cooperation with the minister himself had been very good.

Alogoskoufis added that the government would give the EU two reports by the end of October - one on the growth and stability plan and another on economic reform.
Almunia advocates European social model: The minister said later that Almunia had impeccably wedded the needs of the growth and stability pact for tight fiscal policy to protection of the European social model.

Introducing Almunia before a speech the commissioner was due to make, Alogoskoufis also described him as a progressive, who was interested in social developments and creation of a just and viable social model aiming at growth and social solidarity.

"We will also continue to work very well together in the future," he said.
 "In a difficult set of circumstances, we have lowered the fiscal deficit in Greece by three percentage points of gross domestic product to 3.6% this year from 6.6% in 2004," the minister added.

Greece needs sustainable public finances, commissioner says: The main challenge for Greece is to ensure the sustainability of public finances, which means addressing fiscal imbalances and pursuing further reform of the social security system, Joaquín Almunia, the European Union's commissioner for economic and monetary affairs, said in a speech in Athens on Wednesday.

Early retirement should be curbed and incentives should be created to get older workers to participate in the labor market, accompanied by an overall reassessment of the pension system, Almunia said.

 A second challenge was the labor market, where action was necessary to address low employment and high structural unemployment, and to strengthen education and vocational training. This would require eliminating rigidity, promoting part-time work, and pursuing active labor market policies. Education and training systems must be more responsive to the real needs of the labor market, the commissioner noted.

A third key challenge was improving competition and the business environment. Recent measures to reduce the administrative burden on corporate start-ups and to simplify regulation and taxation systems were in the right direction, but further progress in liberalizing network industries and transposing EU internal market directives would be welcome.

Finally, increased investment in R&D and education were also crucial to improve productivity performance.

"The recent story of the Greek economy is one of remarkable success in terms of real convergence. Over the last five years, real GDP has been growing at around 3½% per year, significantly more than the euro-area. But, at around 75%, the ratio of GDP per capita in Greece still remains well below the area’s average," the commissioner noted.

"A number of imbalances and risks have emerged or worsened. The current account deficit has increased substantially, up to around 7-8% of GDP. The situation of public finances is still worrying and the insufficient reforms are exposing the country to the growing risks arising from ageing and globalization," he said. "This cannot be sustained for ever."

Decisive steps were needed combining fiscal consolidation and comprehensive structural reform. The latest figure for the 2004 general government deficit is 6.6% of GDP, and the debt ratio is 110% of GDP, the highest in the eurozone. "Surveillance of the Greek situation needs to remain high, given the size of the imbalances," Almunia said.

It was now evident that Greece, like most other EU members, needed to implement important reforms in coming years.

"Let’s be frank: there is no alternative, if we want a dynamic and sustainable social model," the commissioner noted.

"I believe that the benefits brought by the necessary reforms and fiscal discipline will clearly outlay the costs. For this reason, we stand ready to support and stimulate the reforms while making sure, through close vigilance and peer pressure, that all the advantages coming from macroeconomic stability and sound public finances can be soon reaped by all," he concluded.

PM to meet European Commissioner Almunia on Thursday: Prime Minister Costas Karamanlis is scheduled to meet European Commissioner for EU economic and monetary affairs Joaquin Almunia, who is currently in Athens on an official visit, on Thursday at 13:00. Earlier the same day, the premier will be meeting Deputy Culture Minister Petros Tatoulis at 9:30, government spokesman Theodoros Roussopoulos announced.

Source: Athens News Agency

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