(6)

Based on data provided by the Commission (Eurostat) in accordance with Article 8g(1) of Regulation (EC) No 3605/93 following the notification by Greece on 1 April 2007 and on the Commission services’ spring 2007 forecast, the following conclusions are warranted: — the general government deficit was reduced from 7,9 % of GDP in 2004 to 2,6 % of GDP in 2006, which is below the 3 % of GDP deficit reference value. This is identical to the target set in the December 2005 update of the stability programme, — revenues and expenditure contributed to the nominal adjustment of almost 3 percentage points of GDP compared to the 2005 deficit of 5,5 % in almost equal shares. Expressed in terms of the GDP, total revenues increased by 1 percentage points of GDP, with indirect taxes accounting for one-half of a percentage point of GDP. The remaining percentage point is accounted for by increases in social contributions and other revenues, including capital transfers (EU transfers). Total expenditure was reduced by 1 percentage points of GDP, mainly driven by reductions in primary expenditure (by 0,5 % of GDP) and in interest expenditure (0,25 % of GDP). Capital expenditures were also reduced by around one-half of a percentage point of GDP. One-off revenues amounted to 0,6 % of GDP. The improvement in the structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) is estimated at 2,25 % of GDP in 2006. The deficit debt adjustment at 2,3 % of GDP is largely explained, — for 2007, the Commission services’ spring 2007 forecast projects that the deficit will be reduced further, to 2,4 % of GDP. This is in line with the official deficit target of 2,4 % of GDP set in the December 2006 update of the stability programme. However, the Commission services’ forecast includes additional one-off revenues amounting to 0,25 % of GDP, as well as permanent expenditure-saving measures amounting to about 0,25 % of GDP, both as announced by the cut-off date of the Commission services spring 2007 forecast and thus not reflected in the December 2006 official target. In spite of this, the spring forecast deficit projection for 2007 is not better than the target as the impact of these new measures is offset both by more cautious growth assumptions and the fact that the permanent measures planned for 2007 would not, in the view of the Commission, fully replace the decline in one-off revenues. Without one-offs, the deficit would still be below the reference value, at 2,9 % of GDP. For 2008, the spring forecast projects, on a no-policy-change basis, a deficit of 2,7 % of GDP without inclusion of one-offs for 2008. This indicates that the deficit has been brought below the 3 % of GDP ceiling in a credible and sustainable manner. The structural balance is projected to improve in 2007 by around one quarter of a percentage point of GDP and, on a no-policy change basis, by a marginal amount in 2008. This has to be seen against the need to make progress towards the medium-term objective for the budgetary position, which for Greece is a balanced position in structural terms, — government debt declined from 108,5 % of GDP in 2004 to 104,5 % in 2006. According to the spring 2007 forecast, the debt ratio is projected to fall further to around 97,5 % by the end of 2008, still well above the 60 % of GDP reference value. The debt ratio can be considered as sufficiently diminishing towards the 60 % of GDP reference value.