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Greece Budgets Falling short of Requirements for Bailout
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1. Greece will miss a deficit target set just months ago in a massive bailout package, according to government draft budget figures released on Sunday, showing that drastic steps taken to avert bankruptcy may not be enough.
The 2012 draft budget approved by cabinet on Sunday predicts a deficit of 8.5 percent of gross domestic product (GDP) for 2011, well short of the 7.6 percent target.
The 2012 deficit is set to meet a nominal target of 14.6 billion euros, but at 6.8 percent of GDP it falls short of a target of 6.5 percent, because the economy will shrink further.
U.S. banks including Morgan Stanley and Bank of America have all seen their credit default swap costs jump as other banks hedge their counterparty exposures and speculative traders bet on the situation worsening.
The shortfall in the 2011 deficit target means Greece would need almost 2 billion extra euros just to finance its expenses for this year. It also means additional emergency tax hikes and wage cuts announced in the past two months to hit the target have not been enough to put Greece’s finances back on track.
“The vicious circle continues for the government,” said Yannis Varoufakis, economic professor at Athens University. “We have disappointing revenues, missed targets and this will bring new measures and new austerity.”
To persuade the troika to release the next tranche of loans, Greece has promised to raise taxes, cut state wages and speed up plans to reduce the number of public sector workers by a fifth by 2015.
Greece GDP is predicted to fall by 5.5 percent this year. Government sources said it was expected to shrink 2-2.5 percent next year
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