Greece may beat a target to reduce the European Union’s second-widest budget deficit, allowing the country to return to markets to raise debt, Finance Minister George Papaconstantinou said.
“Our hope is to tap markets sometime in 2011,” though Greece can hold off until 2012, Papaconstantinou told reporters in Athens today. A planned auction of short-term Treasury bills this month isn’t considered “a return to markets,” he said.
Euro-area leaders and the International Monetary Fund agreed in early May to extend 110 billion euros ($138 billion) in emergency loans to Greece, which faced soaring borrowing costs amid investor concerns it would default on its debt. In exchange for the aid, the government vowed to implement austerity measures of almost 14 percent of gross domestic product over four years.
Papaconstantinou said a government forecast for the economy to contract 4 percent this year is “overly pessimistic.” Initial signs show the economy shrank 3 percent in the second quarter from a year earlier, he said, following a 2.5 percent retreat in the first quarter.
EU and IMF officials are monitoring Greece’s economic performance to sign off on the loans, with the next tranche of 9 billion euros due in late August or early September, according to Papaconstantinou. A final 9 billion euros will be paid before the year ends, he said. The team of inspectors will return to Athens from July 20 through Aug. 6, he said.
The country may need no additional deficit-reduction measures if it adheres to its austerity plan, Papaconstantinou said. While he said revenue income remains a risk with Greece “slightly behind in targets” in the first six months of the year, it is set to beat its deficit goal on spending cuts. The budget shortfall stood at 4.9 percent of GDP in the first half, compared with a target of 5.8 percent for the period, he said.
Revenue next year will be aided by a planned increase in the so-called objective values for real estate, Papaconstantinou said. Taxes on real-estate transactions in Greece are based on the government’s assessment of the property’s value, which considers the area and the amenities, rather than the actual market value, which is generally higher.
Prime Minister George Papandreou has raised taxes, cut wages and reduced spending in a bid to tame a deficit that reached 13.6 percent of GDP last year, more than four times the EU limit.