Greece’s Deteriorating Finances Mean More Cuts to Meet Targets

Greece’s fiscal deficit is projected to increase next year if a new government does not pass additional budget cuts in the coming months.

The budget shortfall will widen to 8.4 percent of gross domestic product in 2013 from a projected 7.3 percent this year, compared with a target deficit of 4.6 percent, the European Commission said in a report today. The primary deficit, which excludes interest repayments, will widen to 2 percent from 1 percent, according to the report.

“The government aims at achieving a primary surplus of 1.8 percent of GDP in 2013,” the commission said in the report. “Based on current projections, this would require additional expenditure savings of 3.8 percent of GDP to be identified in the coming months.”

Greece’s political leaders are in a fifth day of talks today to carve out a government with Evangelos Venizelos, the socialist Pasok leader, pressing counterparts on a proposal for a unity government that would avert a new election. Both Pasok and the New Democracy party led by Antonis Samaras, which came first in elections on May 6, have said they want to renegotiate aspects of Greece’s bailout terms with the European Union and the International Monetary Fund.

Greece’s ratio of debt to GDP is projected to rise to 168 percent next year from 161 percent, according to today’s report. The economy will contract 4.7 percent this year and show zero growth in 2013, the commission said.

To contact the reporter on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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Socialist Pasok Leader Evangelos Venizelos

Simon Dawson/Bloomberg

Greece’s political leaders are in a fifth day of talks today to carve out a government with Evangelos Venizelos, the socialist Pasok leader, pressing counterparts on a proposal for a unity government that would avert a new election.

Greece’s political leaders are in a fifth day of talks today to carve out a government with Evangelos Venizelos, the socialist Pasok leader, pressing counterparts on a proposal for a unity government that would avert a new election. Photographer: Simon Dawson/Bloomberg

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May 11 (Bloomberg) -- Constantinos Michalos, president of the Athens Chamber of Commerce and Industry, and Christos Pitelis, director of the Centre for International Business and Management at Cambridge University, talk about the political deadlock in Greece and the terms of the country's bailout. They speak with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)