ATHENS, Sept 13 (AFP) - Eurozone member Greece is struggling to justify part of its excessive public deficit as forgivable exceptional spending for the Athens Olympics amid heated debate across the European Union over what exactly constitutes such expenditure.
"I have been raising the issue of exceptional circumstances regarding the Olympics from the first time I went to the European Union," Greek Economy and Finance Minister Yiorgos Alogoskoufis, who took office in March, told a news conference Monday.
EU ministers did not agree Friday on a European Commission proposal to loosen the definition of "exceptional circumstances" in which governments can breach a three percent of gross domestic product (GDP) limit prescribed by the 12-state eurozone's Stability and Growth Pact.
"I have said that this (Olympic spending) is temporary expenditure... No economic logic suggests that large temporary expenses, such as those of the Olympiad, should not be financed by borrowing," said Alogoskoufis about Friday's meeting in which he took part.
"This has not been entirely accepted. But the climate is already changing," the minister added.
But Alogoskoufis clarified that Greece was not invoking exceptional circumstances to delay putting its finances in order, promising that the public deficit will be below three percent of GDP in 2005.
"Greece is seeking no further time to adjust... We have pledged that the budget of 2005 will reestablish fiscal balance. That means that the (public) deficit will be below three percent of gross domestic product," Alogoskoufis said.
The Olympics cost Greece around seven billion euros (8.6 billion dollars) and helped push the country's public deficit for 2004 to 5.3 percent of gross domestic product (GDP) -- way above the three-percent limit.
Greece's public debt for 2004 will reach 112 percent of GDP, nearly twice as high as the pact's 60-percent ceiling.
Greece, Italy and "other countries" objected Friday to a commission proposal that seemingly penalised eurozone members' for the size of their public debt rather than their failure to cut it, as is currently the case. Greece and Italy are the eurozone's most indebted members.
Greek Prime Minister Costas Karamanlis said Saturday that Athens would cut defence spending and boost revenue by 1.5 billion euros (1.84 billion dollars) in privatisation receipts.
Karamanlis's conservative government took office in March and immediately revised the previous socialist administration's budget figures which showed Greece well within eurozone limits.
The socialists had deliberately under-reported Olympics- and defence-related spending while overestimating social funds' suprluses, Karamanlis said Saturday.
According to senior Greek statistics officials, Olympic spending accounts for about a quarter of the country's budget deficit this year.
The socialist opposition has in turn accused the conservatives of fudging the budget figures to tarnish their record in power. The socialist Pasok party had ruled Greece since 1993 and improved the country's finances to secure eurozone membership in 2001.