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Eurostat: the 2009 budget of Greece is 15.4% of GDP

15 November 2010 / 16:11:48  GRReporter
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After the mayoral and regional elections in Greece, the first problem to rank is again the local economy and the accomplishment of the goals set by the IMF and the countries of the eurozone in the Memorandum of financial support. The government should meet even in the first day of the week the leaders of the mission, Poul Thomsen (IMF), Servaas Deroose (EC) and Klaus Masuch (ECB) to discuss the recent developments in local finance.
On the one hand, the official government deficit for 2009 was finally announced today – 15.4 percent of GDP. The external debt turned out to be 126.8 percent of GDP. On the other hand, the measures should be declared to offset the gap that exceeds four billion euros. The Ministry of Finance failed to gain around two billion euros to achieve the targets for 2010 and to reduce the deficit, and the impact of the revised deficit for 2009 on this year’s fiscal plan is about 2.6 billion euros. Total of 4.6 billion euros are hanging on the neck of the government of George Papandreou as a millstone. Instead of decreasing  the budget deficit to 8.1 percent of GDP following all the stringent measures imposed during the year it seems that its value will be around 9.8 percent of GDP.

The Greek government has two opportunities - either to renegotiate its obligations to the Memorandum of financial support, or to impose additional measures to implement fiscal consolidation. The problem with the second option is that further raising taxes, reducing pensions and mass redundancies in the public sector can not be applied. Economists and financial experts estimate that the potential for similar measures have been exhausted and the government should resort to use the state property, privatization and to generally reduce the role of government in economic life. Renegotiation of the obligations to the Memorandum of financial support on the other hand causes mixed creditor responses.

According to Naftemboriki, the government negotiated in the last two weeks with Washington, Brussels and Frankfurt for a flexible repayment of the obligations under the financial support. In other words, rescheduling the 110 billion euros debt, which the International Monetary Fund, the European Commission and European Central Bank agreed to grant in early spring, because Greece lost the confidence of international markets and could not be credited. These negotiations are based on the increase in the 2009 deficit – a fact that today's government is not responsible of. The Greek newspaper also informs that IMF fully supports the idea of extension, the ECB is hesitant and the European Commission strongly opposes such an extension.

"Greece should achieve its objectives under the Memorandum of financial support to regain the lost trust," said the EC representative Bini Smaghi to Katemerini newspaper. He is adamant that any discussion of changing the goals will have a negative impact and will further shaken confidence in the country and even in the eurozone as a whole. Smaghi stressed that if this happens, all the sacrifices made so far will be wasted.

Tags: EconomyMarketsEurostatExternal debtPayment reschedulingFinancial crisis
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