Greece sets a tough Budget

GREECE will cut its budget deficit to seven per cent of gross domestic product (GDP) and launch a fresh wave of cuts in the public sector it said in its draft budget yesterday.

The 2011 budget, aimed at convincing European leaders that it is on track to tackle its deficit crisis, would see the debt narrowed more than expected.

Under an agreement with Europe, which bailed Greece out with a €110bn (£95bn) package, the country is required to cut the level of debt to 7.6 per cent of GDP.

The country’s fiscal gap in 2011 would be €16.35bn, down from €18.5bn this year, according to the documents.
Revenue will rise 6.9 per cent on a year-to-year basis to €56.3bn, and spending will fall 5.9 per cent to €67.5bn next year, according to the draft budget. It also forecasts that the Greek economy will shrink by 2.6 per cent in 2011 after a drop of four per cent in 2010.

The country has set in motion a series of emergency measures including a blitz on unpaid tax and public sector cuts which have triggered a series of strikes.

Despite the economic storm China has backed Greece’ s recovery package with a support for the country’s shipping industry and a pledge to buy Greek government bonds.

Finance minister George Papaconstantinou and Prime Minister George Papandreou said yesterday that more cutting was inevitable if the Greek economy was to secure a long-term recovery.

TIME LINE | HOW THE GREEK DEBT CRISIS HAS UNFOLDED

Jan 14 2010 Greece unveils stability programme, saying it will aim to cut its budget gap to 2.8 per cent of GDP in 2012 from 12.7 per cent in 2009.

2 Feb Prime Minister George Papandreou says the government will extend a public sector wage freeze to those making below €2,000 a month.

24 Feb Strikes against austerity measures cripples Greece’s transport and public services.

5 Mar New package of public sector pay cuts and tax increases is passed to save an extra €4.8bn.

11 April Eurozone finance ministers approve €30bn emergency aid mechanism for Greece but say Athens has not yet asked to activate plan.

23 April Prime Minister George Papandreou asks for activation of an EU/IMF aid package €110bn.

2 May Greece seals a deal with the EU and IMF opening the door to a multi-billion euro bailout and extra budget cuts of €30bn.

10 May Global policymakers set up $1 trillion fund to stop the Greek crisis destroying the euro.

4 Oct Greece says in budget for 2011 that it will cut debt to seven per cent of GDP. China offers support by buying bonds to help to kickstart the economy.