NEWS IN DETAIL

Prime Minister Costas Simitis said the budget, which he called "harsh, but fair", aims at modernising the economy and achieving targets foreseen in the EU convergence programme.

The proposed state budget includes seven new taxation measures, including taxes on large real estate holdings, interest on state titles, interbank market deposits and derivatives, capital gains of non-listed firms and an increase in taxation on banks.

Armaments programme

"Greece has set forth to Community bodies, such as ECOFIN, the issue of the high expenditures which it is forced to lay out in order to maintain the fighting capability of the armed forces at a high level by acquiring weapon systems," Mr. Reppas said.

Asked if Greece's partners had shown understanding for Athens' request, Mr. Reppas replied that "in these cases there is always ground for understanding to be displayed".

Papantoniou

He said the overall deficit of the state sector would be reduced to 4.2 per cent in 1997 from 7.6 per cent of GDP this year, while the budget deficit from 9.3 to 6.2 per cent of GDP.

Further, he forecast a growth rate in GDP (in constant prices) of 3.3 per cent, compared to 2.6 this year, a fall in inflation from 8.5 to an average level of 6.5 per cent next year, and to 4.5 per cent for all of 1997, that public borrowing requirement will fall by 31.7 per cent, overall public revenue will rise by 17.5 per cent, while tax revenues for the regular budget will by 14.6 per cent.

The gross deficit of the regular budget is estimated to fall by 11.2 per cent, while private and public investment will rise by 8.5 and 18 per cent respectively (in constant prices), and that expenses for health, education and defence will rise above th e average rate.

Mr. Papantoniou also said that the boost in the growth rate will result in a 1.3 per cent rise in employment.

Regarding 1996, he said private and public investment will rise by 8.3 and 15 per cent, respectively, that the average increase in real wages will be 2.5 per cent, while the country's foreign exchange reserves will stand at a record high of US$19.5 billion.

He announced that the policy of the stable drachma will continue next year, with only small margins of fluctuation, while monetary policy will remain restrictive, aiming to facilitate the de-escalation of inflation.

The government will also enact legislation establishing the independence of the Bank of Greece, he said.

He said that grants and appointments in the public sector will freeze over the next two years, and called on the heads of public organisations not accept pay rises above 7 per cent in 1997.

Both National Defence Minister Akis Tsohatzopoulos and Alternate Foreign Minister George Papandreou made it clear that Greece was not prepared to consent to the overturn of the institutional status quo. Mr. Tsohatzopoulos said that if anyone wished to do so,they should raise the issue wholly, and not in a piecemeal fashion.

Both Mr. Tsohatzopoulos and Mr. Papandreou are participating in the WEU ministerial council session in this Belgium port city.

The final text of the session said the issue of participation by associate members like Turkey in WEU missions would be discussed again in future, and that the Belgian presidency would attempt to find a compromise solution until the end of the year.

Mr. Papandreou, in reacting to a view expressed by the Belgian ministers of foreign affairs and defence, that this was a problem of great significance between Greece and Turkey, said the issue concerned the WEU and its associate members, not Athens and Ankara.

Tsohatzopoulos

"Acceptance by the WEU of the terms of operation and participation envisaged by the WEAO charter certainly is not, and could not in any way be construed as delineating a more general orientation, either concerning the development of WEAO into, for instance, a European Armaments Agency, or for the establishment of other groups or organisations by the WEU.

"...no change in WEU's status, or that of its members, associate members or observers can be considered as given by today`s decision," he said.

Yesterday's agreement was also signed by WEU's three associate members, Denmark, Norway, and Turkey, which do not have voting rights. The minister added that any doubt as to the above would put Greece in a difficult position.

WEAO is the evolution of the West European Armaments Group, set up in 1993 by the 10 WEU members and the three associate members, and will now function as an auxiliary WEU body.

Diplomatic sources said that Greek views were accepted both by the Belgian presidency of the WEU ministerial session and by the majority of member- states.

Ms Ciller was quoted on Monday in an article published in the English- language "Turkish Daily News."

The same Greek sources said this view was "unique" in holding that poor relations between Greece and Turkey and Ankara's illegal claims against Greece should not have an influence on Turkey's relations with the EU.

The Turkish foreign minister again proposed dialogue that would include her country's territorial claims against Greece, the sources said. It is obvious, they noted, that these claims by themselves do not allow for creation of any favourable prospects for a good-willed and constructive dialogue.

They added that Greece has repeatedly proposed to Turkey to withdraw its territorial claims or seek recourse at the International Court of Justice at The Hague.

"Turkey does not accept this reasonable Greek proposal because it does not wish dialogue, but instead a recording of its territorial claims," the sources stated.

Ms Ciller must realise that no Greek government would accept the legitimisation of Turkish claims, the same sources added.

The airspace violations took place east of Rhodes, south of Hios and between Hios and Samos.

Greek airforce jets identified and intercepted the Turkish warplanes in all the cases, the sources said.

Petsalnikos discusses education issues with Canadian officials

Mr. Petsalnikos, who made the remarks on Monday in Toronto within the framework of his meeting with the finance minister of the government of Ontario, David Johnson, was briefed on Canada's economic policy of reducing its deficit, measures by the Canadi an government to curb the public sector as well as Ontario's interest in northern Greece.

Talks between the two ministers focused on the issue of the Canadian TVX Gold Co., which has signed a contract to exploit gold reserves in northern Greece and whose problems with local authorities have been overcome completely, as Mr. Petsalnikos said.

Mr. Petsalnikos also had consecutive meetings with Canadian deputies of Greek origin, Mr. Kannis and Mr. Karigiannis, for talks on Greek national issues and the effort to coordinate the Greek-Canadian lobby.

Chief of Staff in Brussels for NATO meeting

The meeting will focus on issues related to the Alliance.

Writers' federation to hold conference in Athens

About 100 writers from 30 countries have been invited by the Greek Writers' Society for talks on issues of concern, such as protection of royalties, plagiarism through the Internet network and the need to create unified legislation in the European Union .

The society will announce the establishment of a Royalties Collective Management Organisation at the conference, which it created together with the Panhellenic Publishers' Federation. The conference will receive financial backing by the culture ministry.

New tax proposal hits interbank market

Banks refused to bid for interest rates of more than 30 days, but agreed to set a reference average interbank rate (Athibor). Banking sources said that the new tax on interbank transactions will lead to higher interest rates.

The market, which saw outflows of US$300 million yesterday, is expected to experience more disruptions and outflows, while sources warned that the situation might affect the bond market as well.

The government is working closely with the Federation of Greek Banks in an effort to normalise operations in the market, reports state.

The obstacles seem to be caused by refusal of certain Italian municipalities and communities to issue construction permits, despite a positive report issued by the Italian environment ministry after the examination of a technical and economic feasibility study.

European Union Energy Commissioner Christos Papoutsis, replying to reporters' questions, expressed his concern over the plan's delay.

"This project is included in pledges taken during the European Council meeting in Essen, while significant community funding has been decided upon, " he said.

"The project is of great political importance for the European Union, due to its economic and strategic value. Because the improvement and increase of energy exchanges have been calculated, which could develop in the long- and short-term between Greece and Italy, with the countries of the Balkans and the Middle East," the commissioner added.

Mr. Papoutsis admitted that restrictions for the protection of the environment cannot be ignored, but stressed that for this particular project, the technical and economic feasibility study has drawn an environmentally friendly line.

New promotional efforts for Cultural Capital '97 announced by Thessaloniki's mayor

Efforts include international press conferences in Berlin, Vienna, Paris and London before the end of the year, all attended by Mr. Kosmopoulos himself.

The Thessaloniki mayor, who is currently on a visit to Austria, met yesterday with the mayor and other municipal officials of Graz, and stressed the traditionally close relations between Thessaloniki and the city.

Graz Mayor Alfred Stingle stressed the significant Greek presence in the Austrian city and wished for the success of Thessaloniki as Cultural Capital 1997.

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