WRITTEN QUESTION E-0580/02

by Alexandros Alavanos (GUE/NGL) to the Commission

(5 March 2002)

Subject: Assessment of the stability programme for Greece

The Commission's assessment (30 January 2002) of the updated stability programme for Greece for the period 2001-2004 reports that The projected decline in the government debt ratio is slower compared with the projections included in the 2000 stability programme: the debt ratio is set to decline from 99,6 % of GDP in 2001 to 90 % of GDP instead of 84 % of GDP in 2004. Developments in the government debt are persistently affected by financial operations; as these are partly not recorded in the budget, lack of transparency raises doubt about the quality of the budgetary adjustment. The Ecofin Council, in approving the updated stability programme, amended the Commission's decision and invited the authorities to provide more detailed information on financial operations in future programme updates in order to allow a better understanding of debt developments. What are the operations which, according to the Commission's communication, are not recorded in the budget? Is there government expenditure which is recorded outside the general budget? What factors create lack of transparency and doubt about the quality of budgetary policy?

Answer given by Mr Solbes Mira on behalf of the Commission

(22 April 2002)

The debt to the gross domestic product (GDP) ratio in Greece is among the highest in the Community and far above the threshold of 60 % of GDP set in the EC Treaty. A rapid reduction in the debt ratio is essential in particular in order to ensure the long-term sustainability of public finance. Greece has made significant progress in recent years in correcting fiscal imbalances but the reduction in the debt ratio has been much smaller than the rapid increase in nominal GDP, the achievement of high and increasing primary surpluses and the reduction in interest rates would have implied. To some extent this was explained by exchange rate movements before the entry of Greece in the euro zone, given that a large part of the government debt was denominated in foreign currencies. However, according to the 2001 update of the stability programme, unspecified factors hold back the decline in the debt ratio to the tune of 4 % of GDP for the period 2002-2004 despite the projected use of privatisation receipts (averaging above 1 % of GDP) to pay-off public debt.

The 2001 update of the stability programme compares the outcome of the stock of debt at the end of 2001 with the projections included in the budget for 2001. The total increase in the stock of debt is estimated at EUR 6,55 billion while the budget projected an increase of EUR 4,78 billion. Factors other than the deficit and the burden from foreign exchange amount to EUR 6,35 billion instead of EUR 3,20 billion as calculated in the budget. Of these, only a small part was due to higher military borrowing while no information is provided for the other factors that caused the faster than projected increase in the stock of debt. In addition, DEKA (a state-owned holding company which is not part of the general government) paid off public debt for an amount equal to EUR 4,46 billion instead of EUR 2,20 billion projected in the budget for 2001.

Against this background, the Commission considers that the multiplication in recent years of operations which do not appear in the deficit but influence debt developments and the fact that the 2001 updated stability programme projects the continuation of such operations in the medium-term, providing no clear information on their purpose, represents a lack of transparency which raises difficulties in assessing the quality of the budgetary adjustment proposed in the stability programme.