Greece and Ireland make progress as deficit rises in Italy

Greece and Ireland have had significant success in reducing their budget deficits whilst Portugal and Italy have both seen their deficits widen, according to a note from Capital Economics.

A reduction in interest payments and a transfer of profits on the ECB's holding of Greek government bonds lead to the Greece's deficit coming in below target. Greece is now on course to run a primary budget surplus over the year.

Ireland has managed to make further inroads into its deficit as tax revenues came in at 3.8 per cent higher than in the period January to August last year and departmental expenditure down 5.4 per cent as compared to last year.

Spain remains on track to reduce the deficit from seven per cent of GDP of 6.5 per cent of GDP by the end of the year. Portugal has seen an increase it's budget deficit however Ben May of Capital Economics points out this is largely due to one off factors

The deficit has actually narrowed if last year’s one-off transfer of pension fund reserves from banks to the Government is excluded. What’s more, this year, Portugal has recorded larger rises in tax revenues than any of the other peripheral economies.

The situation appears increasingly worrying for Italy. The budget deficit has widened and may rise above three per cent of GDP limit set out in the stability and growth pact.