Greece: Greece fails to address widening budget deficit
April 26, 2011
In 2010, the budget deficit reached 10.5% of GDP, raising concerns about Greece's ability to tackle fiscal imbalances and establish a reliable consolidation strategy. The reading exceeded both the official target of 9.4% of GDP and the European Commission forecast of 9.6% of GDP, but, nevertheless, represented a better performance compared with the 15.4% shortfall recorded in 2009. As a consequence, public debt jumped to 142.8% of GDP at the end of 2010, well above the 127.1% recorded in the previous year. The government cited the deterioration in tax revenues, resulting from a larger than anticipated recession in 2010, as the main driver behind the shortfall. In addition, the government stressed its commitment to meet the fiscal goals established under the Economic Adjustment Programme overseen by the European Union and the IMF since May 2010. Owing to the higher-than-expected fiscal deficit, some analysts warned of the increased likelihood of debt restructuring in the near future, which could trigger a new crisis in the Euro area banking system. Meanwhile, earlier in April, the country outlined new plans to achieve its deficit goals, which include EUR 26 billion (USD 38 billion) in budget cuts and EUR 50 billion (USD 73 billion) in sales of state assets. The government expects fiscal deficit will moderate to 7.4% of GDP in 2011.