Tuesday, November 16, 2010

Greece: closing the gap just got harder

Eurostat has revised Greece’s 2009 budget deficit to 15.4% of GDP, up from 13.6% of GDP previously. Public debt was revised up to 126.8% of GDP and is now expected to reach 144% of GDP this year. The revisions were largely due to the inclusion of items that had previously been excluded from the Government’s accounts. The Greek Finance Ministry has revised this year’s deficit to 9.4% of GDP, up from 8.1% forecast in May.

The Government’s pledge to deliver a budget deficit within the EU’s ceiling of 3% of GDP by 2014 just got more difficult. In its May Budget, the Government had committed to a deficit of 7% of GDP for 2011, slightly below the 7.6% agreed as part of the 110 billion Euro EU-led rescue package negotiated in May.

The Finance Minister will submit his final 2011 Budget on November 18, including revised targets. As of yesterday, the Finance Ministry was still committing to the 2014 target.

Meanwhile in Ireland, the Government will in the next month be announcing details of its four year plan to reduce its budget deficit. The Government seems determined at this point to avoid asking for financial assistance. The budget will reveal how realistic that is.