Greece time-pressed to cope with budget deficit

by Maria Spiliopoulou

ATHENS, Jan. 31 (Xinhua) -- Greek economists believe tackling the oversized public sector and tax evasion in an effective way is the plausible solution to their country's problem.

But Greece is time-pressed to tackle those two issues in order to first maintain the country's high living standards and to then prevent the country from being kicked out of the eurozone altogether.

Though its worldwide quality-of-life index ranked 25th in 2007, Greece is experiencing its worst economic situation since 1993 with the second highest budget deficit and the second highest debt to gross domestic product (GDP) ratio in the European Union.

The Greek public debt has accounted for 97 percent of the country's GDP by 2008.

Determination aside, Greek economists have already started making efforts to reduce the budget deficit, to start with.

Giannis Stournaras, head of the country's Economic and Industrial Research Foundation, told Xinhua that tightening fiscal discipline and honing competitiveness would be the key actions in this effort.

The country, the second most industrious within the Organization for Economic Cooperation and Development (OECD), is preparing to open itself to outside investment and with it to more debt.

On the flip side, economics scholars are warning against a worse scenario, as they saw their country inch toward a financial crisis after the interest rates of state bonds had skyrocketed and tax payers had complained about the austere state policies.

Dionisis Hionis, economist and professor at the Democritus University of Thrace, told Xinhua that if the trend could not be reversed in good time, Greece could well end up being a member of the two-speed Economic and Monetary Union (EMU).

"The EU central bank is concerned that if Greece would get the help to curb its state debt, that would set a precedent for other countries with similar problems," said the scholar, "such as Spain, Italy, Portugal and Ireland, to get assistance in future.

"If many countries will enter a deep and prolonged crisis and will not be able to follow the development trend in the European Union, we are bound to move onto the two-speed EMU," Hionis added.

For now, the Greeks are thinking that their fellow EU members cannot afford to let the crisis just reach that level without offering some help to their country to tackle its problem.

The EU partners and international lenders have so far given Greece two months for sorting out its budget deficit as the beginning of the country's financial reform, which is expected to lead to a development in the right direction.