Budget aims for ‘social dividend’

The government yesterday presented the 2002 state budget proposal to Parliament, revising most of its targets for 2001 and 2002 downward because of the economic fallout from the September 11 terrorist attacks on America. Nevertheless, the budget showed strong growth and aimed for a surplus of 0.8 percent of GDP, which will be spent on specific social issues and development, in what National Economy and Finance Minister Nikos Christodoulakis – presenting the budget that is both the first to be drawn up in euros and the last in drachmas – described as a «social dividend» paid out to taxpayers. He said that the budget aimed to ensure fiscal stability, promote significant growth and strengthen the social state. Public debt is budgeted to drop from 99.6 percent in 2001 to 97.3 percent in 2002. Average annual inflation is expected at 2.7 percent in 2002, from 3 percent in 2001, while real increases in public sector wages will increase by 2.5 percent and for pensioners by 3-3.5 percent. Also, for the first time the amount going toward servicing the public debt will fall, to 6.4 percent of GDP or 8.95 billion euros from 9.71 billion euros in 2001. Interest on public debt payments in 2002 will be very high, coming to 20.3 percent. The relevant parliamentary committee will begin discussing the budget proposal on Tuesday. The full Parliament will open the debate on December 17, with a vote at midnight on December 21. Christodoulakis said that the budget aimed to walk a fine line between development and social spending at a time of difficult international conditions. He said that the budget was capable of funding an effective state while maintaining a strong thrust toward further development. According to the introductory report which Christodoulakis presented to Parliament, the overall revenues of the regular budget are expected to come to 38.92 million euros next year, an increase of 6.1 percent from 2001. This increase is based mainly on expected GDP growth, which, at 3.8 percent is down from an earlier estimate of 4 percent, which in turn was down from as high as 5 percent earlier this year. Revenues from direct taxation are forecast to reach 14.617 million euros (an increase of 7.2 percent), on the basis of taxes of past financial years which show an increase of 19.7 percent. Revenues from personal income tax are forecast to increase by 7.7 percent, while the rise in income taxes on legal entities is seen as more conservative, at 6.3 percent, while property taxes are forecast to increase by 6.7 percent. this means that property owners will be called on to pay higher taxes in 2002 after the increase in objective tax values on real estate. Indirect taxation is expected to yield revenues of 20.666 million euros (an increase of 5.3 percent). Value-added taxes are forecast to increase by 8.4 percent, mainly on account of more robust economic activity. Revenues from capital transfer taxes are expected to rise by 17.2 percent. Officials are showing great restraint in their expectations of revenues from taxing share transactions, after budgeting 430 billion drachmas for this year and then seeing real revenues barely reaching 60 billion drachmas. They now expect this form of taxation to harvest about 80 billion drachmas next year. With regard to the 2001 budget, revenues are expected to drop by about 293 million euros (or 0.8 percent) from those forecast. The greatest drop is found in income taxes on legal entities, with a reduction of 801.17 million euros. Opposition parties criticized the budget proposal, with New Democracy party leader Costas Karamanlis commenting: «Virtual budgets, hypothetical situations with arbitrary premises cannot lessen the explosive problem of unemployment and cannot limit the social and regional inequalities… It is clear that the government did not dare. Once again the weight will fall on the shoulders of wage-earners, pensioners, small- and medium-sized businesses and farmers.» (Page 5)