GREECE is set to miss its deficit targets for both this year and next, its finance ministry admitted last night.
Finance minister Evangelos Venizelos said that the deficit is due to come in at 8.5 per cent of GDP this year, almost a whole percentage point above the 7.6 per cent target agreed with Greece’s international lenders.
It will miss the target by less next year, he claimed, forecasting a deficit of 6.8 per cent of GDP versus the 6.5 per cent target.
Although markets expect Greece to default and never held out much hope of the sovereign meeting its targets, the official admission is a blow to political leaders in the rest of Europe, tasked with persuading their voters to fork out for larger bailouts in the future.
However, the Greek cabinet did manage to rubber-stamp its 2012 austerity budget yesterday, agreed between Athens and the troika – the ECB, European Commission and IMF. Without it, Greece would not be able to receive its next €8bn instalment of bailout aid and would go bankrupt in just over two weeks.
The budget confirms plans to place 30,000 civil servants on permanent holiday with 60 per cent pay and to begin laying them off after a year. The measure has been politically difficult to push through because civil service jobs are protected under the Greek constitution and public sector unions are planning protest strikes.
But it could still prove difficult to implement on the ground: reports suggested that as many as eight government buildings have been occupied by striking civil servants over the last week, preventing many ministries from functioning. Among those disrupted were the statistics authority, which is charged with providing reliable figures to the troika for their audit.
Eurozone finance ministers are expected to discuss Greece at a meeting in Brussels today, but will be waiting for the troika inspectors’ report before taking any new decisions.
The inspectors are widely expected to give a green light to the release of the next €8bn tranche of aid to avoid plunging the Eurozone deeper into turmoil. But all eyes will be on their forecasts for 2012-2014.
If the inspectors conclude Greece’s recession will continue to be worse than predicted, EU officials have suggested banks that agreed to write off 21 per cent of the value of their Greek debt holdings in July may be forced to take deeper losses.