Greek budget deficits widens

Greece's budget deficit continued to widen in November as an austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed today.

The budget gap of the central government widened 5.1 per cent year-on-year to €20.52 billion, according to finance ministry figures for January to November. This means that Greece will likely miss its 2011 deficit targets and may need additional austerity measures to catch up with its budget goals next year.

Debt-laden Greece has been consistently missing the deficit targets set by its international lenders under a bailout plan agreed last year, partly due to a deeper-than-expected recession but also because of its own failure to quickly implement reforms and crack down on tax evasion.

The economy is seen shrinking by 5.5 per cent in 2011, its fourth consecutive year of recession. Under the 2012 budget plan approved last week the budget deficit is expected to narrow to 9 per cent of GDP this year from 10.6 percent in 2010, a target the finance ministry said was still feasible.

This year's budget goals largely hinge on a string of emergency taxes imposed in September after Greece's lenders threatened to withhold bailout funds if it did not meet its budget goals, a move that would have effectively rendered the country bankrupt.

"The current revenue shortfall is expected to be addressed in December, when the (emergency) tax measures will yield results," the finance ministry said in the statement.

But a senior government official was less optimistic.

"If current spending and revenue trends continue, the deficit will be at about 10 per cent of GDP and not at about 9 per cent," the official, who declined to be named, told Reuters before today's budget data were announced.

The new taxes included a charge of up to 5 per cent on gross personal income as well as a controversial property tax which households must pay or face having their electricity cut off.

These measures have failed to visibly boost net tax receipts, which shrank by 3.1 per cent year-on-year in January to November, a slightly slower pace than their 4.1 per cent drop in the first 10 months of the year.

Recession is dealing a further blow to the budget as the government steps up grants to social security organisations, whose revenues are drying up. Spending before interest payments rose by 3 per cent year-on-year in Jan-Nov, according to the figures.

The data refer to the state budget deficit, which excludes items such as local authorities. Even though they are not identical with it, they are indicative for the general government shortfall, the benchmark for the EU's assessment of Greece's economic policy programme.

Reuters