Greece given extra year to get deficit in line

The European Commission has given Greece an extra year to bring its budget deficit in line with European Union rules, a move that could signal growing leniency towards fiscal discipline.

The EU executive said it had recommended extending until 2006 from 2005 the deadline for Greece to cut its budget gap to below the cap of 3 per cent of gross domestic product laid down in the Stability and Growth Pact that underpins the euro.

Massive revisions to Greek budget data have shown it breaking the EU deficit cap every year since 1997. The Commission believes this year's deficit will be equivalent to 3.6 per cent of GDP, against the 5.5 per cent estimated for 2004.

Greek spending soared in 2004, partly due to the cost of hosting last summer's Olympic Games, and the Commission said the Greek economy could suffer if the deficit had to be slashed right away.

Greece said yesterday it was determined to bring the budget deficit to below the EU deficit cap by 2006, a target which will be set out in the country's updated stability and growth programme.

EU finance ministers will debate the recommendation on February 17th. - Reuters