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09 November, 2000
Bank of Greece governor Lucas Papademos said on Wednesday that consumer price inflation might rise slightly above October's 4.0 percent year on year over the next two months.
At the same time, inflation would begin to decline in 2001, giving an annual average of 3.0 percent or above.
In October, core inflation was 2.7 percent year on year, Papademos said.
Creating uncertainty in inflation forecasts were the high price of oil and the US dollar's surge against the euro, Papademos added.
On its part, the Greek government announced the freezing of state enterprises' bills for the next six months and all their demands for price increases.
National Economy and Finance Minister, Yiannos Papantoniou, speaking to reporters said the measures were decided to avoid any new pressures on inflation in the coming months.
Papantoniou said a jump in the inflation rate in October (to 4.0 percent) did not alter the government's economic policy (incomes' policy and interest rates) because it was a result of foreign developments, such as high oil prices in international markets and a strengthening of the US dollar against the euro. However, both factors were showing signs of stabilization, he said.
Papantoniou predicted that the inflation rate in Greece would move within the government's forecasts in the next few months. The inflation rate is expected to fall by one percentage point in 2001 compared with the current year even if oil prices remained at 30 dollars per barrel, he said. "A fall of the oil price below that level (to 26-28 dollars per barrel) will offer even larger benefits to the country's inflation," he noted.
The government's economic team expects inflation to be around an average 2.3 percent next year.
Commenting on monetary policy, Papantoniou said that interest rates would fall in the last two months of the year to achieve the short-term interest rates convergence criterion before the country's formal entry in EMU by January 1, 2001.
Referring on EU efforts to reform Europe's social security system to deal with fiscal problems caused by an ageing population in the continent, Papantoniou said that the Greek government has hired a foreign consultant to draft a report on the country's social security system, to be used as a basis for a dialogue on reform with social partners. He pledged that the state would continue subsidizing social security funds under a new system.
Papantoniou said that Tuesday 2, January 2001 would be a holiday for banks and the stock market in Greece. This decision was taken, he said, to ensure that banks and the stock market were better prepared to converse their accounting systems from drachma to euro.
He said that the euro currency will begin circulating from January 1, 2002, in the country and would co-exist with the drachma for the first six months of the year. After that period the drachma currency would be withdrawn, he said.
Source: Athens News Agency
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