Deficit widened despite tax moves

Greece's budget deficit continued to widen in September due to an austerity-driven recession, despite a fresh batch of tax measures that were supposed to start lifting receipts.

The central government deficit grew 15 percent year-on-year to 19.16 billion euros in the first nine months of the year, finance ministry data showed. The figure was slightly narrower than a revised target of ?19.24 billion.

In September, Athens increased sales tax on restaurants to 23 percent and started collecting a one-off tax ranging from 1-5 percent on gross income. But the moves failed to visibly boost net tax receipts, which shrank by 4.2 percent year-on-year in Jan-Sept, compared with a 5.3 percent drop in the first eight months of the year.

Greece said on Wednesday it would catch up with a target to increase net tax receipts by 0.8 percent for the full year, helped by a new property tax and other spending cuts that will kick in in the rest of the year. «The current revenue shortfall is expected to be dealt with in the last quarter,» the Finance Ministry said.

Primary spending before interest payments rose by 2.9 percent year-on-year, mainly because the government increased payments to social security organizations, whose revenues are drying up because of the recession.

The figures issued by the ministry on Wednesday relate to the state budget deficit, which excludes spending in some areas, and is not the criteria used for the assessment of Greece's fiscal reforms by foreign auditors.

On Tuesday, officials of the European Commission, European Central Bank and International Monetary Fund gave a cautious recommendation that Greece receive the next tranche of crucial emergency loans, noting that the government had achieved «a major reduction in the deficit» but that the deficit target for 2011 - revised to 8.5 percent of gross domestic product from 7.6 percent last month - was nevertheless «no longer within reach.»

The government had indicated earlier this month that it would miss its deficit targets, blaming the slippage chiefly on a severe recesson.