ECONOMY

Deficit rises to 10.5 pct in 2010 (Update)

The EU’s statistics agency, Eurostat, revised Greece’s government deficit higher to 10.5 percent of economic output last year, well above the previous 9.6 percent forecast, as Athens said that it stands ready to take further painful measures if needed.

The revision was due to a larger than expected contraction in the economy last year, as well as a deterioration in tax revenue, according to Greece?s Finance Ministry.

Worsening finances at local governments, social security funds and public hospitals also contributed, the ministry said.

?The Greek government remains focused on achieving its targets and intends to take all the necessary action to achieve them,? it added in a statement.

Eurostat also said that Greece?s debt swelled to 142.8 percent of gross domestic product (GDP), the highest in the eurozone and above the 140.2 percent the EU’s executive Commission had predicted.

Investors continued to shun Greek debt on Tuesday over escalating concerns the country would restructure its debt.

Markets are pricing in a growing probability that Greece will need to restructure — despite EU and Greek officials dismissing the idea — pushing the country’s credit default swaps and short-dated yields to their highest since the launch of the euro zone.

The 10-year Greek yield rose to 15.51 percent, up 44 bps on the day, with the paper trading at 56.19 percent of its face value. Greek credit default swaps rose 37 basis points to 1,340 bps.

Traders, however, said there was little flow behind the price moves.

“No one sees a reason for [Greek yield spreads] to tighten, with volumes so low… There’s no natural buyer [of Greek debt] of any size in terms of these markets right now,» a trader told Reuters.

“The only potential buyer is the European Central Bank but the … relatively random talk that is coming out on restructuring doesn’t help the situation (so) the ECB won’t buy whilst [some other euro zone countries] continue to speak and put pressure on Greece to restructure.”