The problems in the execution of this year?s budget are leading to the likelihood of a new bailout package and a new memorandum with more realistic fiscal targets.
Preliminary estimates from the data collected by Greece?s creditors whose representatives have been carrying out inspections in Athens since Tuesday suggest that the budget shortfall is far greater than the 3 billion euros that the government had been predicting until recently. Sources speak of additional measures required to plug a 4- to 5-billion-euro hole.
Kathimerini understands that Finance Minister Giorgos Papaconstantinou has already embarked on a series of talks with the eurozone, the European Central Bank and the International Monetary Fund about a revision to the fiscal target for 2011 since the monitoring committee visited in February, when the international experts had called for additional measures to bring in 1.8 billion euros. The shortfall was smaller then and could have easily been covered by treasury bill issues.
However, at the time the prevailing thought was to wait and see how things would develop at the European level, mainly as far as Portugal was concerned, while there were also expectations of a rebound in revenues.
The considerable problems in the execution of the budget are attributed to the revenues shortfall they are not expected to rebound anymore as the reorganization of the tax mechanism has been delayed and recession is making things worse as well as to the needs of public bodies such as the Manpower Organization (OAED) and the Social Security Foundation (IKA), which require additional credit of some 1.2 billion euros. Other social security funds are also certain to require more funding soon.
This divergence from the 2011 budget is such that it cannot be offset anymore without a drastic cut in expenditure that would be politically and socially unbearable and would prolong the recession on the economic front.
The target of reducing the budget deficit to 17 billion euros now seems impossible, while the hole in state coffers is so big that the country will need additional loans beyond the original 100-billion-euro package. This is why Greece?s creditors and the government will likely start discussing a new package as a better solution for Greece?s problems, adjusted to the reality of the country?s finances this year.