- ATHENS – Wracked by recession, Greece will not meet deficit targets imposed by international lenders as a condition of a $152 billion bailout designed to keep the country from going bankrupt, the Finance Ministry admitted.
- The deficit is expected to be 8.5 percent of Gross Domestic Product (GDP) or $25.2 billion, more than the $23.1 earlier estimated, as Greeks – hit with deep pay cuts and big tax hikes – have stopped spending and nearly 100,000 businesses have closed because of austerity measures demanded by the Troika of the European Union-International Monetary Fund-European Central Bank.
- Prime Minister George Papandreou has followed the first wave of measures with more, including a slew of tax hikes and the imminent layoff of 30,000 workers in hopes of getting a second $157 billion bailout as Greece is subsisting on loans to pay its workers, pensioners and bills. I want to repeat that we will be unswerving in our goal: to fulfill all that we have promised to ensure the credibility of our country,” Papandreou told an extraordinary cabinet meeting called to approve the country’s 2012 draft budget as well as the job-cut plan. The meeting came just one day before European finance ministers are due to meet in Luxembourg to discuss Greece’s progress on reforms, and follows three days of talks with a delegation of international auditors in Athens.
Greece has agreed to take some $8.81 billion in new austerity measures in 2011 and 2012 to bring its budget back on track with commitments made to its international creditors. The draft budget is due to be formally introduced in Parliament on Oct. 3 and voted on by the end of the month. Greece is also awaiting approval on the next loan installment, for $11 billion, which Finance Minister Evangelos Venizelos saying he was confident it would now be approved.
The Finance Ministry said the missed target was because of a deeper-than-expected recession, with the economy contracting by 5.5 percent instead of the 3.8 percent estimate made in May and said it could get worse unless all the austerity measures were implemented even though they have been one of the reasons for the country’s shrinking economy. “The final estimate for a deficit equal to 8.5 percent of GDP can be achieved, if there is a proper response by the state authorities and the citizens themselves, on whose stance the country’s financial … and social future depends,” the announcement said. Officials admitted a big reason for the failure to meet the targets is that the government has not collected enough money from tax evaders costing nearly $40 billion in lost revenues annually. Officials blamed tax inspectors for not doing their jobs and more Greeks finding ways not to pay taxes as they’ve become angered at the austerity measures and their belief that the rich and powerful aren’t paying taxes either.
Many taxpayers have already said they will also refuse to pay a new emergency property tax even though it is being put into their electric bills with the threat of having their power turned off unless they comply. That is designed to raise only $2 billion, a minute amount of the budget needs. The 2012 budget is projected to reduce the deficit to $19.82 billion, or 6.8 percent of GDP, up from the 6.5 percent target agreed with the Troika but Greece has repeatedly missed deadlines and predictions. The government said it is committed to reducing civil service jobs by 150,000 within four years.
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