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Leader tipped to fall back in growth race

Greek GDP growth has outpaced that of EU peers since 1996 but underlying fiscal imbalances exacerbated by faltering privatization and the inevitable passing of the Olympics effect look set to slow it down. Dimitris Kontogiannis reports.

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The Greek economy is expected to continue the outperformance of its EU partners that started in 1996, growing by about 4% in 2003 and 4.2% in 2004. By contrast, the European Commission (EC) forecasts GDP growth of 0.8% in 2003 and 2% in 2004 for the 15-member European Union as a whole and even lower rates of 0.4% and 1.8% for the eurozone.

There is, though, a downside to the Greek dynamism: its economy shows signs of fiscal slippage. This is causing concern about the country's public debt and growth prospects, bankers and economists say. And the government's strenuous efforts to redeploy privatization proceeds are meeting with mixed results.

Pillars of growth For now outperformance is based on the twin pillars of strong investment spending and healthy consumption growth. Backed by huge inflows from EU Structural Funds, preparations for the 2004 Olympic Games and the lowest interest rates in a generation, investment spending has become the main motor of growth. Generous wage rises and tax cuts have bolstered disposable income which, along with expanding consumer loans on the back of favourable interest rates, have accounted for real consumption growth rates in excess of 3%, further boosting the economy.

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