Books on Greece
Area (sq km)
% of GDP
Update No: 093 - (28/01/05)
The EU on the Greek economy
Greek Minister of Finance Giorgos Alogoskoufis was in Brussels on January 17th
to attend the Eurogroup and ECOFIN meetings in which the EU Ministers of Finance
were to discuss the European Commission proposal on the adoption of further
measures by the Greek government, aimed at bringing the Greek public deficit
below 3% of the GDP, in line with Euroland requirements.
Both Eurogroup and ECOFIN adopted the Commission's proposal, based on which the
Greek moves aimed at cutting the deficit were neither appropriate nor adequate.
A European Union investigation has found that Greece broke the eurozone's
critical deficit ceiling of 3% of GDP every year since 1998, contrary to the
earlier claim that it stuck to the rules. The European Commission said that
there was no legal basis to throw Greece out of the single currency, which it
joined in 2001 on the back of the grossly misleading deficit data.
Greece is likely to escape expulsion from the euro, even though it has been
revealed that Athens gave false deficit figures to enable it to join the single
currency. That was under the previous Socialist Party (Pasok) government, voted
out last March. The new government of Costas Karamanlis's New Democracy cannot
be blamed, since Karamasnlis and his supporters wee strongly critical of Pasok
profligacy at the time.
The EU, nevertheless, raised the pressure on Greece on January 18th, saying it
faces a hefty fine because its 2005 budget deficit will be 3.6 percent of gross
domestic product - well over the maximum 3 percent allowed under the stability
rules of the euro.
EU Finance Commissioner Joaquin Almunia is to recommend austerity measures for
Greece that must be approved by the EU finance ministers. Never since the euro
came into circulation in 2002 has the EU gone so far in taking legal steps
against a violator of the currency's stability rules.
In 2003, it took on France and Germany for running excessive budget gaps.
However, the two countries resisted, rallying a majority of EU nations around a
declaration saying Paris and Berlin will get their deficits under 3 percent of
GDP by 2005. Although it successfully challenged that in the EU high court, the
European Commission then effectively abandoned legal steps against France and
Last year, the European Commission put Greece's budget deficit at 5.5 percent of
GDP after learning Athens had provided flawed statistics about its economic
performance in the years leading up to the introduction of the euro in 2002.
While the Greek deficit is declining, Almunia thinks that it will still exceed
the 3 percent of GDP ceiling in 2005.
In a statement, issued on the second day of their regular monthly session, the
EU finance ministers blamed Greece's large deficits on dubious statistics, cost
overruns in the 2004 Olympic Games and other spending areas as well as
"shortfalls in certain revenue items."
Already last December, Almunia predicted Greece would fail to bring its deficit
to under 3 percent of GDP despite the fact it has one of the highest growth
rates in the EU. Greece has said its deficit in 2005 will amount to 2.8 percent
of GDP, a figure its EU partners dismiss as optimistic.
However, Greece could yet face EU penalties in the wake of the most serious
statistical irregularities since the launch of the euro. José Manuel Barroso's
new Commission must decide whether to seek fines against Greece in the European
Court of Justice; it can also withdraw regional aid worth more than €500m a
year, or take other action under the stability and growth pact if the high
The revelations are embarrassing for Greek policymakers, including Lucas
Papademos, the vice-president of the European Central Bank, who was Greek
central bank governor at the time of Greece's entry into the eurozone. It
appeared that Greece would attempt to stave off punishment from the EU by
pointing to tougher accounting criteria that had been applied to Greece
retroactively and which were not applied when other countries were joining the
Nicholas Garganas, governor of the Bank of Greece, said in an interview with the
Financial Times that the methods used to measure deficits had been altered.
"I don't think that the people of Greece and Europe were misled," he
said. "It is not really fair to draw such conclusions when we know that
since 2000 the method of preparing, or calculating, budget deficits has
Eurozone finance ministers, meeting in Brussels, picked over the Greek scandal,
hoping to draw lessons on how to rebuild confidence in the EU's financial data.
The revelations have embarrassed EU leaders, with Jean-Claude Trichet, president
of the European Central Bank, describing them as "an enormous
A team of investigators from Eurostat, the EU's statistical arm, showed that in
1998 the deficit was 4.1 per cent of gross domestic product, compared with 2.5
per cent reported by Greece. In 1999, the final year taken into consideration
when the country joined the euro, the revised figure was 3.4 per cent, compared
with the official 1.8 per cent.
Eurostat had already reported how Greece consistently gave false figures in
subsequent years, culminating in the claim in 2003 that its deficit was 1.7 per
cent, when it was 4.6 per cent. The distortions have been attributed to a number
of causes, including the mis-recording of military expenditure and the treatment
of a social security fund.
PM mulls action to restore ND unity
Costas Karamanlis is preparing to go on the offensive in a bid to wipe out
internal wrangles within New Democracy, caused by opposition to certain
government policies from some MPs, party unionists and hardliners, sources close
to the prime minister told Kathimerini.
The ongoing dispute, as of January, involving cotton farmers, who are
threatening to blockade roads around the country if the government does not buy
up their excess produce, has brought the issue to the fore. Many leading
officials in the ND union (DAKE) are opposed to the government's refusal to give
in to farmers' demands.
New Democracy Secretary Evangelos Meimarakis has hinted at the possible
expulsion of some members from the party. However, sources indicate that polls
conducted on behalf of the Maximos Mansion suggests that the government may be
better off by refusing to be drawn into a public slanging match with its
internal critics. The theory seems to be that the more the unionists and others
criticize, the more it dispels the impression in the mind of the public that New
Democracy is simply satisfying the demands of its "own boys" and not
serving the greater good.
The approach to the dissention among MPs, however, is likely to be very
different according to sources. The prime minister is said to be unwilling to
accept such deviations from the party line and may take steps to tackle the
MINERALS & METALS
Talks to sell Aluminium begin
Canadian aluminium giant Alcan Inc announced recently that it has launched
exclusive talks with Greek group, Mytilineos Holdings SA, for the potential sale
of Alcan's interest in Aluminium of Greece SA. "The consideration of a
possible sale of Alcan's controlling interest in Aluminium of Greece is part of
our ongoing efforts to identify and develop value creating options," said
Cynthia Carroll, president and CEO of Alcan Primary Metal Group. "We are
confident that the positive outcome of these discussions would contribute to
Aluminium of Greece's long-term sustainability," she added. The shared
objective of the parties is to finalise the terms and conditions of the
OTE ready for full privatisation
Hellenic Telecommunications Organisation (OTE) is ready for a full privatisation
but any development in this process depends on the government, ANA quoted
Hellenic Telecoms' Chairman and chief executive, Panagis Vourloumis, as saying
recently. Speaking to reporters at a news conference, Vourloumis said an early
retirement programme launched by the organisation's board was facing certain
problems but a dialogue with employees was continuing. He stressed that
broadband services was a top priority for Hellenic Telecoms and noted that a
procedure to transfer the shares of Bulgarian and FYROM mobile telephony
operator subsidiaries to CosmOTE was currently under way. Vourloumis added there
were no plans for OTE to absorb CosmOTE.