The economy continued to expand briskly in 2003, with robust domestic demand compensating for weak exports. Nevertheless, the general government deficit rose to 3 per cent of GDP. Activity is set to slow somewhat in the period ahead, as Olympic Games-related investment comes to an end, but growth will continue to outpace the euro area average. Inflation is likely to average around 3¼ per cent over the projection period and the large current account deficit is expected to narrow gradually. Meeting the objectives of further fiscal consolidation and a lower public debt-to-GDP ratio will require much stricter control of public finances, for which the completion of pension and tax reforms and further improvements in administrative efficiency are indispensable first steps. Together with measures to strengthen labour market flexibility, enhanced competitiveness and innovation are also required to ensure non-inflationary growth and the convergence of incomes to European Union levels over the medium term...