Greece’s 2009 deficit is revised up for third time

THE EU’s statistics agency Eurostat revised Greece’s 2009 deficit upwards for a third time yesterday, to 15.4 percent of gross domestic product (GDP) compared with a previous 13.6 per cent estimate.

Greece’s finance ministry said it would still manage to bring the shortfall below the e]urozone’s three per cent of GDP ceiling in 2014, despite the revision, starting with a 6-point cut this year to 9.4 per cent of GDP.

Greece’s debt, however, is now seen swelling to 144 per cent of GDP this year from 126.8 per cent of GDP in 2009. Under previous estimates published last month in the country’s 2011 draft budget, the debt figure was supposed to rise to 133 per cent of GDP this year from 115 per cent of GDP in 2009.

The revised figures suggest that Greece will find it hard to avoid a debt restructuring, some analysts said.

Greek Prime Minister George Papandreou said Germany’s insistence on a future mechanism for banks and bond markets to share the pain of any euro zone sovereign debt default from 2013 could break some EU economies.

“This could break backs. This could force economies towards bankruptcy”, Papandreou said during a visit to Paris.

Bond yield spreads of deficit-ridden nations such as Greece, Ireland and Portugal have soared since German Chancellor Angela Merkel last month kicked off a debate about a debt restructuring mechanism for troubled Eurozone nations, although EU finance ministers have since said it would not apply to existing bonds.

“It created a spiral of higher interest rates for countries that seemed to be in a difficult position, such as Ireland or Portugal,” Papandreou said. “This could create a self-fulfilling prophecy.”

While worries increased in the eurozone countries, EU and IMF officials arrived in Athens for an inspection visit of the country’s finances yesterday.