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2005 OECD Economic Surveys: Greece 2005

image of OECD Economic Surveys: Greece 2005

This 2005 edition of OECD's periodic survey of Greece's economy examines two key challenges: the need for sustained fiscal consolidation and closing the income gap with the European Union. After an examination of major economic trends, the Survey looks in more detail at the fiscal challenge and at raising productivity and labour force participation. This edition's special chapter looks at the economic impact of migration in Greece.

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The Fiscal Challenge

Fiscal policy faces difficult challenges in both the short and medium run in light of the recently revealed sharp deterioration in the fiscal position. The latest Stability and Growth Programme envisages a reduction of the general government deficit from 6% in 2004 to below 3% of GDP in 2006, requiring significant corrective action within a period of two years. The public debt remains high, at around 110% of GDP, with large demographic pressures emerging after 2015. The key is to constrain primary expenditure – through spending prioritisation – and limit tax evasion, reducing budget deficit to the levels targeted by Greece’s Stability Programme and making room for lower taxes and enhanced spending in growth-promoting areas. Decisive steps will also be needed to enhance administrative efficiency and reform the health care system, ensuring its financial viability. Tax reform should seek to further simplify the system and to reduce its various distortions of resource...

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