The government has decided to stop tax returns and other obligation payments to enterprises, salary workers and pensioners as it sees the budget deficit soaring to over 10 percent of gross domestic product for 2011.
The Finance Ministry is desperately seeking ways to contain the fiscal deficit that has swollen due to additional grants to social security funds totaling 0.5-0.9 percent of GDP and due to the lagging of public revenues in the year?s first 11 months.
Finance Minister Evangelos Venizelos and his alternate, Filippos Sachinidis, met on Monday with the other high-level ministry officials and agreed to issue an order to the country?s tax authorities to immediately stop paying tax returns to taxpayers, companies and state suppliers.
They also decided to promote a new regulation at the start of 2012 allowing for old debts to be paid in 60 installments, at a minimum sum of 300 euros each, in an effort to bring more revenues into the state coffers.
Provisional figures for the first 10 days of December showed that public revenues remained at low levels, although a pleasant surprise came in the form of the special property tax paid through electricity bills. This revenue has exceeded expectations, although a share of that will have to be returned owing to errors made in calculating the tax for certain property owners.
Under these circumstances, state revenues are expected to lag the revised target for 2011 by a considerable 1.5 billion euros at least, while the excess on the expenditure side will be calculated after the amount granted to the social security funds is established.
The only way to reduce the damage done to the 2011 budget by insufficient revenues is through further cuts to the Public Investment Program, but even then the deficit will be impossible to bring below 10 percent of GDP.
Sachinidis admitted in Parliament yesterday that both the government and its creditors have failed in their estimates for Greece?s macroeconomics this year, saying that this was also down to the financial program followed.