Budget revenue soars but state investment is weak
Ordinary budget revenue leapt 18.6 percent in the first quarter, above a targeted 10.3 percent, boding well for the government’s deficit-cutting efforts this year, Finance Ministry data showed yesterday. The ministry said the implementation of budget targets in the first quarter showed a marked improvement compared with a year earlier. «The budget deficit, which amounted to 2.465 billion euros in the first quarter of 2005, was reduced to 489 million in this year’s first quarter. It was contained by 80.2 percent,» it said. Greece is aiming to bring its fiscal deficit to 2.6 percent of gross domestic product (GDP) this year from an upwardly revised 4.5 percent in 2005 to avoid EU sanctions under the so-called excessive deficit procedure. Greece, which joined the eurozone in 2001, angered its EU partners after saying it under-reported past budget data, breaking the EU deficit cap every year since 1997. The European Commission’s forecast for Greece’s budget deficit for this year is expected on May 8. The EU ceiling for budget deficits is 3 percent of GDP. On Monday EU statistics agency Eurostat said the country’s fiscal gap in the past two years turned out higher than previously reported. Last year’s budget hole was 4.5 percent, higher than a previously reported 4.3 percent. The 2004 deficit was revised to 6.9 from 6.6 percent. The 2004 revision was due to lower than originally reporter pension fund surpluses, while the 2005 deficit gained mostly through a one-off 400-million-euro fine over irregularities in EU-funded public project during the previous, Socialist government’s tenure. This was part of a larger, 512-million-euro fine which the present government had hoped to amortize over several years but agreed to pay off instead. The Commission did not comment on whether larger deficits made it harder for Greece to attain its 2.6 percent goal for this year – a target the government has repeatedly said will be reached. Figures from the country’s General Accounting Office showed government spending was down 2.9 percent in the first three months of the year versus a targeted rise of 4.4 percent. Primary spending grew 2.8 percent, below a 6.0 percent target. Weak investment The government is still concerned about the implementation of the public investment program, where both spending and revenue are way below target: in the first quarter revenue was 772 million euros, a 1 percent decline over last year’s first quarter, when the government has forecast a revenue increase of 26.2 percent, to 3.49 billion euros. Spending on public investment declined 6.1 percent, to 692 million euros, versus a full-year target of an 11.7 percent increase, to 8.4 billion. While the figures are good for the deficit, some government officials worry that a continued weakness in public investment may adversely impact growth. There is also little sign of the much-anticipated public-private partnerships, in which private capital would be used to build public projects taking off. Salaries for government workers make up the largest part of primary spending – 45 percent – with 32 percent being subsidies to pension funds. The ordinary budget plus the government’s public investment program make up the central government budget. The general government budget, which is the one that must show a deficit below 3 percent, comprises the central government budget plus defense spending, transfers to the social security system and other public entity surpluses. (Reuters/Kathimerini)
