Greek debt problems 'worse than ever'
Debt-ridden Greece is even further in the red than most people thought, experts warned today.
Its 2009 budget deficit and debt levels were much higher than previously estimated, the European Union statistics agency said, making it unlikely the country will reach targets set out in its bailout agreement.
Greece’s 2009 budget deficit reached 15.4% of gross domestic product, significantly above its previous estimate of a 13.6% deficit, Eurostat said.
Public debt stood at 126.8% of GDP at the end of last year, higher than that of any other EU state. In April, Eurostat had estimated the figure at 115.1% of GDP.
The revisions are likely to mean Greece will not achieve its initial target of lowering the deficit to 8.1% of GDP by the end of this year.
Prime Minister George Papandreou insisted last week that his government would still be able to reduce the deficit by at least 5.5% by the end of the year, as promised.
But he conceded the deficit revision would add pressure on his government to cut costs, and said Greece could seek an extension for repaying its rescue loans.
The upward revision of debt and deficit levels was widely expected since Eurostat said there were some issues with the Greek data when it released its previous estimates in April. The statistics agency said today that all the issues has been addressed.
The revised data came as Greece’s finance minister met the International Monetary Fund, the European Commission and the European Central Bank.
The three delegations, dubbed the “troika,” were in Athens to review the country’s finances, as part of regular checks of Greece’s implementation of the three-year €110bn loan agreement that rescued it from bankruptcy in May.
Greece has struggled to raise revenue, with figures showing it is lagging behind its targets, although it has generally performed better in spending cuts. The government imposed stringent austerity measures, including cutting civil servants’ salaries, hiking taxes and freezing pensions, earlier this year.
The government’s austerity measures led to a backlash from unions, which have organised a series of strikes and protests, some of which have turned violent.
Without the bailout loans, Greece would have already defaulted on its debts. It is effectively locked out of the international bond market by the massively high interest rates it would have to pay if it were to issue bonds – a reflection of low trust in the country’s prospects.
Local elections held yesterday gave Prime Minister George Papandreou a welcome boost amid recession and rising unemployment.
His governing Socialist party won mayoral races in Athens and Greece’s second largest city of Thessaloniki for the first time in 24 years, while its candidates won eight of 13 regional governor races.
However, voter turnout hit record lows, with just 34% in Athens and 47% nationally – figures that opposition parties argued revealed popular discontent with the government.
Voting is mandatory in Greece, although in practice penalties are no longer imposed on those who do not cast ballots.
