Economic activity is centered on the capital, Athens, and Greece’s second city, Thessalonika

Emphasis placed on creating internationally competitive sectors to generate jobs, income, and wealth

HE consistently high rate of economic growth achieved by Greece in recent years is the envy of most other member states of the European Union.

According to George Alogoskoufis, Minister of Economy and Finance, it is a trend that is set to continue for the foreseeable future.

Mr. Alogoskoufis is predicting that the economy will expand by 3.9% in 2005. He invokes the Olympic spirit, describing the government’s economic goals as ambitious but realistic.

“Undertaking to organize the Olympic Games was in itself an ambitious goal, and we have been successful,” he says. “I am confident that we shall all succeed in meeting the new challenges that lie ahead and in laying the foundations for long-lasting, stable, and sustainable growth.”

The government is committed to tax and administrative reform, liberalization of the economy, deregulation and privatization. Its strategy is aimed at strengthening the potential for growth, employment, and social cohesion, and at promoting real convergence between Greece and the more developed economies of the EU.
“We have launched efforts to improve our competitiveness by reducing administrative barriers, cutting corporate taxes, and improving tax administration,” says Mr. Alogoskoufis. “We are transforming the Greek economy into a dynamic, outward looking one, an economy that will increasingly rely on internationally competitive sectors to push it forward and to generate jobs, income and wealth.”

At the same time, efforts are being stepped up to close the digital divide with other European nations by converting Greece into a “new economy” through the advance of electronic commerce, production-linked research, and training in new technologies. New impetus has been given to the EU-funded Operational Program for the Information Society (OPIS), which has launched a series of new projects and initiatives this year.

A new development law will support small- and medium-sized enterprises (SMEs) to boost employment around the country. Measures have been announced offering increased financial backing to SMEs, raising capital subsidies and tax incentives, promoting exports, technology and innovation, and the production of new goods and services of high added value. Support is also being provided to farmers and to the shipping industry.

At the same time, the administration has made clear its commitment to bringing public finances back on track, promising greater transparency than its socialist predecessor. It has already carried out a far-reaching audit of fiscal accounts, which has resulted in an upward revision of the general government debt and deficit for the period 2000-2004.

Exacerbated by expenditure on the Olympic Games, Greece’s gross public debt for 2004 is put at 112% of GDP. The final bill for the Games is estimated at up to 10 billion euros ($12.2 billion)—around twice the original budget. Greece’s fiscal deficit is set to rise to 5.3% of GDP—above the ceiling of 3% set by the Eurozone’s Growth and Stability Pact.

Mr. Alogoskoufis has pledged to bring the deficit down to 2.8% of GDP by the end of 2005. This will be achieved through moderate wage growth for the public sector, the reduction of operating expenditure for ministries, and measures to contain costs and borrowing by public organizations and enterprises.

A tax amnesty has also been announced, and significant savings will be achieved through cuts in the military budget.

“We are committed to correcting the current situation as rapidly as possible,” says Mr. Alogoskoufis. “Fiscal consolidation in the near future remains a key concern of the government.”