Greece Sees Deficit Above Target After Revisions

Greece expects the budget deficit in 2010 will be larger than initially targeted after the EU's statistics agency said Monday the country's debt last year was actually much higher than projected.

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But the country, which has been struggling with a severe financial crisis for the past year and is receiving a 110 billion euro ($150 billion), three-year package of rescue loans to keep it from defaulting on its debts, insisted it was still on track to achieve an "unprecedented" 6 percentage point deficit reduction.

Eurostat, the statistics agency, said Greece's 2009 budget deficit reached 15.4 percent of gross domestic product, significantly above its previous estimate of 13.6 percent.

That means Greece will not achieve its initial target of lowering the deficit to 8.1 percent of GDP by the end of this year, with the Finance Ministry saying the 2010 deficit was now estimated to be 9.4 percent of GDP.

"Despite the data revision, the deficit reduction in 2010 is larger than initially targeted; 6 percentage points of GDP against a targeted reduction of 5.5 percentage points," the ministry said in a statement.

"The new starting point for the 2009 deficit reveals the magnitude of the unprecedented fiscal effort made by the Greek government in 2010," it said.

Public debt stood at 126.8 percent of GDP at the end of last year — or 298.03 million euro — higher than that of any other EU state, Eurostat said. In April, it had estimated the figure at 115.1 percent of GDP.

In a weekend newspaper interview, Prime Minister George Papandreou conceded the long expected 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 anticipated since Eurostat said there were issues with Greek data when it released its previous estimates in April. The statistics agency said Monday that all the issues has been addressed and it no longer had any reservations.

The revised data came as Greece's finance minister was meeting with officials from the International Monetary Fund, the European Commission and the European Central Bank, who were in Greece on a regular inspection visit to review Greece's finances.

The reviews are part of regular checks of Greece's implementation of the rescue loan agreement that prevented it from defaulting on its debt in May.

"Fiscal consolidation will continue within the targets and the framework of the Economic and Financial Program agreed with the EU, ECB and IMF leading to a fiscal deficit below 3 percent of GDP in 2014," the Finance Ministry said, noting that the full measures for next year's fiscal program would be detailed in the 2011 budget to be submitted to Parliament on Nov. 18.

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 measures led to a backlash from labor unions, which have organized a series of strikes and protests, some of which have turned violent. Greece's Communist Party planned a protest against the rescue loan program on Monday evening.

Without the 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 Sunday 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.