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Greek 2010 Budget Gap Wider Than Estimated, Eurostat Says

Greek 2010 Budget Gap Was Wider Than Estimated, Eurostat
Pedestrians and yellow taxi cabs pass the Bank of Greece headquarters in Athens. Photographer: Eirini Vourloumis/Bloomberg

Greece’s 2010 budget gap was more than a percentage point wider than the government estimated after a review by Europe’s statistics agency, the latest blow to the nation’s finances as it seeks to avoid a debt restructuring.

Last year’s shortfall was 10.5 percent of gross domestic product, compared with 15.4 percent of GDP in 2009, Eurostat said in a statement today from Luxembourg. In February, the Greek government had said it met its revised target for a 9.4 percent deficit in 2010.

The revision is another setback in Greece’s efforts to meet targets set out under last year’s 110 billion-euro ($160 billion) bailout from the European Union and the International Monetary Fund. The government still aims to cut the deficit to 7.4 percent of GDP this year, and earmarked 3 billion euros in unspecified savings to account for fiscal slippage in 2011 as part of 26 billion euros in measures announced on April 15.

Euro-area debt reached a record in 2010, Eurostat also said today, making it harder for the bloc’s better-off countries to bear the costs of the fiscal crisis triggered by Greece. Debt rose in all 16 euro-region countries, lifting the bloc’s average to 85.1 percent of GDP from 79.3 percent in 2009, the statistics office said. Greece’s debt ballooned to 142.8 percent of GDP, the highest in the euro’s 12-year history.


Growing investor concern that Greece won’t avoid defaulting on its debt has sent Greek bond yields soaring to record levels since April 14, when German Finance Minister Wolfgang Schaeuble was quoted as saying Greece may need to restructure its debt.

Greek government bonds fell, pushing the yield on the two-year security up 64 basis points to a euro-era record of 23.65 percent as of 7:38 a.m. in London. The government in Athens has ruled out a restructuring, saying it would devastate domestic banks and hammer the economy.

“I don’t think that Greece will succeed in this consolidation strategy without any restructuring,” Lars Feld, a member of German Chancellor Angela Merkel’s council of economic advisers, said in a Bloomberg Television interview today. “I think that Greece should restructure sooner than later.”

Greece’s government said today it remained committed to meeting the targets of its bailout program and stood ready to take further measures to lower the deficit. The wider gap was due to a larger-than-expected economic contraction last year as well as deterioration in tax revenue and worsening finances at local governments, social-security funds and public hospitals, the Finance Ministry said in an e-mailed statement.

Greece’s economy shrank 4.5 percent last year, compared with the 4.2 percent forecast in November when the 2011 budget was announced.

Faster Cuts

Greece’s state-controlled pension funds recorded a deficit of 500 million euros in 2010, instead of an initially reported 900 million-euro surplus, Kathimerini reported on March 29. Greece plans to implement deficit cuts this year originally scheduled for 2012 to offset a wider-than-anticipated 2010 budget gap, Naftemporiki reported today.

The measures announced by Prime Minister George Papandreou earlier this month consist mostly of spending cuts and aim to bring the deficit below 1 percent by 2015. They go further than the demands set out under the bailout, which require Greece to cut the shortfall to less than 3 percent by 2014.

The government also announced plans on April 15 to raise 15 billion euros in state-asset sales by the end of 2013, and 50 billion euros by the end of 2015.

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