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Greece ‘ahead of the curve’ on fiscal targets
By David Gardner and Kerin Hope in Athens
Published: July 27 2010 23:24 | Last updated: July 27 2010 23:24
Greece is determined to show it can outperform tough fiscal targets set by the European Union and International Monetary Fund, said George Papaconstantinou, finance minister.
But the government still faces strong resistance to structural reforms – from opening up closed-shop professions such as truck driving to cutting about 50,000 jobs in local government and lossmaking state enterprise.
In an interview with the Financial Times, Mr Papaconstantinou said in the first half of this year the budget deficit had been slashed by 45 per cent after deep cuts in public consumption and capital investment.
He said Greece has taken more measures than were necessary to cut the deficit this year from 13.6 per cent to 8.1 per cent of gross domestic product.
A 30-member mission from the so-called troika – the EU, IMF and European Central Bank – arrived in Athens this week to assess reforms launched in return for a €110bn loan package, which rescued Greece from a sovereign default.
Mr Papaconstantinou sounded confident that the troika would award Greece a pass mark on progress, enabling it to draw down a second €9bn ($11.7bn, £7.5bn) loan tranche in September.
“We are ahead of the curve, mostly due to reduction of expenditures ... Revenues are lagging slightly behind ... but we’re reasonably optimistic that even on the revenue side we’ll meet the targets,” he said.
An increase of 4 percentage points in value added tax, on top of a 30 per cent rise in excise taxes, would help boost inflows in the second half, he said.
The impact of cuts in public sector wages and pensions on overall spending would bring further reductions, he added.
Mr Papaconstantinou also predicted that Greece’s recession would be shallower than forecast, with the economy set to shrink this year by 3 to 3.5 per cent, compared with an earlier projection of 4 per cent.
But he admitted there were “danger zones” that could undermine fiscal consolidation, such as persistent spending overruns at state hospitals.
After weathering six months of strikes and demonstrations over cuts in public sector pay and pensions, Mr Papaconstantinou said, the remaining reforms should be implemented as quickly as possible.
“Every time you try to reform something, there are going to be vested interests that rise up against it, so the more we concentrate it into a short time period, the better,” he said.
Truck drivers went on strike this week to protest against plans to raise the number of operating licences, while flights at Athens airport were delayed by air traffic controllers working to rule to show their opposition to changes in labour regulations.
But Mr Papaconstantinou was reluctant to talk about public sector job cuts, saying the current plan calls for workers to take early retirement or move to other state-controlled organisations. “It doesn’t involve straight firings, although we are not renewing a large number of non-permanent contracts ... That is where we are at the moment. We shall see where that gets us,” he said.
(Financial Times)
By David Gardner and Kerin Hope in Athens
Published: July 27 2010 23:24 | Last updated: July 27 2010 23:24
Greece is determined to show it can outperform tough fiscal targets set by the European Union and International Monetary Fund, said George Papaconstantinou, finance minister.
But the government still faces strong resistance to structural reforms – from opening up closed-shop professions such as truck driving to cutting about 50,000 jobs in local government and lossmaking state enterprise.
In an interview with the Financial Times, Mr Papaconstantinou said in the first half of this year the budget deficit had been slashed by 45 per cent after deep cuts in public consumption and capital investment.
He said Greece has taken more measures than were necessary to cut the deficit this year from 13.6 per cent to 8.1 per cent of gross domestic product.
A 30-member mission from the so-called troika – the EU, IMF and European Central Bank – arrived in Athens this week to assess reforms launched in return for a €110bn loan package, which rescued Greece from a sovereign default.
Mr Papaconstantinou sounded confident that the troika would award Greece a pass mark on progress, enabling it to draw down a second €9bn ($11.7bn, £7.5bn) loan tranche in September.
“We are ahead of the curve, mostly due to reduction of expenditures ... Revenues are lagging slightly behind ... but we’re reasonably optimistic that even on the revenue side we’ll meet the targets,” he said.
An increase of 4 percentage points in value added tax, on top of a 30 per cent rise in excise taxes, would help boost inflows in the second half, he said.
The impact of cuts in public sector wages and pensions on overall spending would bring further reductions, he added.
Mr Papaconstantinou also predicted that Greece’s recession would be shallower than forecast, with the economy set to shrink this year by 3 to 3.5 per cent, compared with an earlier projection of 4 per cent.
But he admitted there were “danger zones” that could undermine fiscal consolidation, such as persistent spending overruns at state hospitals.
After weathering six months of strikes and demonstrations over cuts in public sector pay and pensions, Mr Papaconstantinou said, the remaining reforms should be implemented as quickly as possible.
“Every time you try to reform something, there are going to be vested interests that rise up against it, so the more we concentrate it into a short time period, the better,” he said.
Truck drivers went on strike this week to protest against plans to raise the number of operating licences, while flights at Athens airport were delayed by air traffic controllers working to rule to show their opposition to changes in labour regulations.
But Mr Papaconstantinou was reluctant to talk about public sector job cuts, saying the current plan calls for workers to take early retirement or move to other state-controlled organisations. “It doesn’t involve straight firings, although we are not renewing a large number of non-permanent contracts ... That is where we are at the moment. We shall see where that gets us,” he said.
(Financial Times)
di 1 punto da 73.5 a 74.5.
