Greece's Finance Minister Nikos Christodoulakis admitted Wednesday that the government's increase in social spending will result in a higher deficit.

The budget gap is now seen at 1% in 2004 versus the government's target of 0.4%.

Christodoulakis said that there will be a gradual decrease in the deficit from 2005 onwards.

The government has estimated that this year's deficit will be 1% of gross domestic product. Economists see it slightly over 1.1%.

Earlier, Prime Minister Costas Simitis outlined a four-year social and economic program that involves tax breaks and benefits to low-income earners and pensioners.