COUNCIL OPINION of 12 October 1998 on the Convergence Programme of Greece, 1998-2001
Date: 1998-10-12
Institutions: Council of the European Union
Subjects: Greece, budget deficit, budget policy, economic convergence, economic stabilisation, inflation

C  372/2

EN

Official  Journal  of  the  European  Communities

2.12.98

COUNCIL  OPINION

of  12  October  1998

on  the  Convergence  Programme  of  Greece,  1998(cid:220)2001

(98/C  372/02)

THE  COUNCIL  OF  THE  EUROPEAN  UNION,

Having  regard  to  the  Treaty  establishing  the  European
Community,

Having  regard  to  Council  Regulation  (EC)  No  1466/97
of  7  July  1997  on  the  strengthening  of  the  surveillance  of
budgetary  positions  and  the  surveillance  and  coordi(cid:220)
nation  of  economic  policies(cid:216)(˛),  and  in  particular  Article
9(1)  and  (2)  thereof,

Having 
Commission,

regard 

to 

the 

recommendation  of 

the

After  consulting  the  Monetary  Committee,

HAS  DELIVERED  THIS  OPINION:

On  12  October  the  Council  examined  the  Convergence
the  period
for  Greece  which  covers 
programme 
1998(cid:220)2001.  The  Council  notes  with  satisfaction  that  the
primary  objective  of  the  programme  is  the  fulfilment  by
Greece  of  the  conditions  allowing  for  a  full  participation
in  the  Euro(cid:220)area  from  1  January  2001.  The  Council
the
therefore  considers  appropriate 
programme  on  disinflation  and  budgetary  consolidation.
Moreover,  the  Council  considers  that  the  programme  is
consistent  with  the  Broad  Economic  Policy  Guidelines.

focus  of 

the 

The  programme  is  built  upon  a  marco(cid:220)economic  forecast
showing  strong  investment(cid:220)led  real  growth  coupled  with
declining  inflation  which  is  expected  to  be  underpinned
by  lasting  wage  moderation  and  fiscal  adjustment.  The
Council  notes  that  securing  high  growth  together  with
disinflation  requires,  inter  alia,  o  good  performance  of
the  supply(cid:220)side  of  the  Greek  economy.

if 

inflation 

Wage  developments  are  crucial 
is  to  be
brought  down  on  a  durable  basis.  The  Council  welcomes
the  wage  agreement  covering  1998(cid:220)99  and  urges  all
those  involved  to  implement  it  rigorously.  The  Council
emphasises  the  need  to  strengthen  wage  moderation  for
the  following  years  of  the  programme  on  the  basis  of  the
programme’s  targets  for  inflation.  The  Council  considers
that  the  Greek  Government  should  be  ready  to  take  the
necessary  measures  to  secure  durable  progress  in  dis(cid:220)
inflation.

(˛)(cid:217)OJ  L  209,  2.8.1997,  p.  1.

The  Council  commends  the  programme’s  strategy  of
bringing  about  the  reduction  of  the  deficit  to  0,8(cid:216)%  of
GDP 
in  2001  through  the  containment  of  primary
current  expenditure,  thus  allowing  for  a  rising  level  of
Government 
investment.  In  this  context  the  Council
considered  that  the  definition  of  an  ex  ante  and  binding
norm  for  the  control  of  primary  current  expenditure
would  have  been  welcome.  In  the  short  term,  the
Council  urges  the  Greek  Government  to  achieve  the
2,4(cid:216)%  of  GDP  target  for  the  general  Government  deficit
in  1998.

The  Council  notes  that  the  Government  gross  debt  ratio
is  still  very  high  in  Greece  and  that  it  is  important  to
secure  that  during  the  programme  period  the  reduction
of  the  deficit 
in  the
reduction  of  the  debt  than  was  the  case  up  to  now.
Moreover,  greater  use  should  be  made  of  privatisation
receipts  to  reduce  the  Government  debt.

is  reflected  to  a 

larger  extent 

The  Council  welcomes  the  structural  reforms  included  in
the  programme  which  are  geared  towards  the  labour
market,  the  social  security  system  and  the  wider  public
sector.  The  Council  urges  the  Greek  Government  to
implement  them  as  scheduled  and  pursue  further  the
reform  effort  in  order  to  enhance  the  potential  and  effi(cid:220)
ciency  of  the  Greek  economy.

to 
take 
its  targets,  even 

The  underlying  budgetary  position  corresponding  to  the
deficit  target  of  0,8(cid:216)%  of  GDP  in  2001  provides  a  safety
margin  against  breaching  the  3(cid:216)%  of  GDP  threshold  as  a
result  of  normal  cyclical  fluctuations.  In  this  sense,  the
programme  is  an  important  step  in  the  direction  of  the
requirements  of  the  Stability  and  Growth  Pact.  The
Council  urges  the  Greek  Government  ot  implement  the
the  necessary
programme  vigorously  and 
if  the  macro(cid:220)
measures  to  achieve 
less  favourable.  This  would
economic  environment 
represent 
fiscal
imbalances  which  have  for  long  been  a  feature  of  the
Greek  economy.  The  Council  notes  that,  after  the
convergence  programme  has  been  submitted,  the  Greek
intention  to  target  a
government  has  announced 
less 
general  government  deficit  which 
the
than 
for  1999.  A
programme’s 
fiscal
the 
significant  reinforcement  of 
adjustment,  if  confirmed  through  the  whole  period  of  the
programme,  would  be  most  welcome  to  the  Council.

is 
target  of  2,1(cid:216)%  GDP 

is 
impressive 

correction  of 

the  pace  of 

the 

an 

its