Greece to slash deficit and extend cuts

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.

The 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 Greece is required to cut the level to 7.6 per cent.

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 expects spending will fall 5.9 per cent to €67.5bn, 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.

Greece pledged to promised to cut its budget deficit from 13.6 per cent of GDP in 2009 to 8.1 per cent by the end of this year in order to secure a €110bn bailout.

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.

Greek bonds were Europe’s top performers last quarter, gaining for the first time since the debt crisis began.
Finance Minister George Papaconstantinou said: "We are on a path of aggressive fiscal adjustment. In just one year we did the biggest deficit reduction ever managed by a euro zone country.”

The country’s deficit almost hit 14 per cent last year.