Greece set to miss targets

City A.M. Reporter
GREECE will have to slash spending even further in the coming years if it is to meet agreed fiscal targets underpinning the second international bailout for Athens, a European Commission (EC) report has said.

The country needs to cut an additional 5.5 per cent of GDP from government spending in 2013 and 2014, according to the Compliance Report, written by the EU’s executive.

It describes the progress of Greek reforms necessary for the release of new Eurozone money to Athens and recommends the first disbursement be made as soon as possible.

The report, obtained by Reuters, said a package of savings adopted by Greece in early 2012 worth 1.5 per cent of GDP should allow Athens to meet the target of bringing the primary deficit down to one per cent this year.

“However, current projections reveal large fiscal gaps in 2013-14,” the Commission report said, adding that the shortfall for the two years totalled 5.5 per cent.

“Therefore, substantial additional expenditure cuts will have to be announced and adopted by Greece in the coming months, in particular when Greece updates its medium-term budget in May 2012.”

The report said that in preparation for the new cuts the government was reviewing public spending programmes, focusing on savings in social transfers, defence and the restructuring of central and local administration.

There would be job cuts in the public sector according to a redundancy and recruitment rule of one entry for five exits. Athens is to further cut pharmaceutical spending and operational spending of hospitals as well as welfare cash benefits.