By Angelika Papamiltiadou
ATHENS (MNI) – The Bank of Greece’s interim report, due to be
published Tuesday, will argue that the Greek economy cannot withstand
further tax increases and the government must now focus on boosting
growth and competitiveness as well as finding alternative sources of
revenue, well-placed officials in Athens told Market News International.
These sources said that Bank of Greece Governor George Provopoulos,
who is a member of the European Central Bank’s Governing Council, is
expected to stress the need for “more intensified efforts to combat tax
evasion and better use of the state’s assets in order to avoid hiking
taxes further.”
The report will also highlight progress made by the Greek economy,
but will note that “not all problems are solved,” that the road is still
long, and there is no room for complacency or delay. Greece’s E110
billion loan agreement with the Eurozone and IMF was a necessary “tool”
to exit from the crisis, the report will say.
The report will also urge the government to seek greater investment
from abroad, the officials said. It will argue that two-thirds of
planned deficit reductions should be achieved by spending cuts and
one-third by increased revenues. No more taxes should be imposed on
businesses and households, which have shouldered the bulk of the
austerity package announced last May, the report is expected to argue.
According to figures for January through September, published by
the Greek finance ministry, the government again missed its (downwardly
revised) revenue target while, for the first time, spending cuts were
also below target.
The Greek government, which is planning another round of cuts in
the public sector under the current plan, is withholding announcement of
2011 budget proposals until after the municipal elections on November 7
and 14.
Despite the repeated promises of Finance Minister George
Papaconstantinou that “there will be no additional [austerity] measures
in 2011,” the European Commissioner for Economic and Monetary Affairs,
Oli Rehn, indicated last week that the upward debt and deficit revisions
expected to be announced by Eurostat for the years 2006-2009 will likely
create a need for additional measures.
Rehn’s statement, made during the Eurogroup press conference in
Luxembourg, generated political waves in Greece since it came only a few
hours after Prime Minister George Papandreou had said there would be “no
new measures.” Following Rehn’s statement, Papandreou revised his
position to say there would be no new measures “that will burden people
with low incomes and low pensions.”
Eurostat, in an unexpected move, refrained from publishing its
revisions for the Greek data last Friday along with the figures for
other EU countries. Instead, it will release the revised Greek figures
on November 15, one day after the municipal elections in Greece.
Opposition parties have accused the Commission of abetting the
socialist PASOK government, which is trying to avoid defeat. But the
Commission argued that Eurostat was not ready to publish the data
because the examination is as yet inconclusive.
According to Commission sources, the findings so far put Greece’s
2009 public deficit at 15.6% of GDP — compared with the current
official number of 13.5% — and debt close to 127%. Finance ministry
officials have publicly indicated that the 2009 deficit could reach 16%.
The revisions are mainly due to state obligations and loan
guarantees for indebted utility companies (DEKO), social security funds,
hospitals, and local government organizations.
In its report, the Bank of Greece will make special mention of the
DEKOs, saying that their restructuring must be speeded up and improved,
and that the government should proceed with another round of mergers
while shutting down unviable public companies.
The report estimates that the Greek economy will contract by around
4% in 2010 and says that return to growth will demand “a multi-pronged
and holistic approach, which should be based on a new growth model.”
Under no circumstances, the report says, should Greece return to
the pre-crisis model, which was based on consumption, since growth can
no longer be financed by “domestic means.” That is because net savings
are shrinking and at the same time the banking system does not have the
necessary liquidity to boost the economy, the report says.
In the report, George Provopoulos, the central bank governor, once
again calls on Greek banks to “make the necessary strategic moves” in
order to ensure the sustainability of the banking system.
–Angelika Papamiltiadou, +306-937-100071; a_papamiltiadou@hotmail.com
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