ECONOMY

Budget deficit widens 24 percent at end-July

Greece?s central government deficit widened 24 percent in the first seven months of the year as the country?s economy shrank and revenue fell.

The shortfall, which excludes outlays by state-owned institutions and companies, increased to 15.5 billion euros from 12.5 billion euros a year earlier, preliminary data released by the Finance Ministry showed on Wednesday.

Ordinary spending increased 7.1 percent to 40.9 billion euros, boosted in part by additional interest payments of 1.3 billion euros, the ministry said. Net revenue decreased 6.4 percent to 26.8 billion euros.

The ministry blamed the drop on a deeper-than-forecast recession that hit revenue and an increase in rebates to people who paid too much tax in 2010. The revenue shortfall will be ?tackled during the next months? as new tax rules come into effect, the ministry said.

Prime Minister George Papandreou added 6.4 billion euros in additional measures to the budget for this year, including increasing working hours for civil servants and tax rates on yachts, pools and luxury vehicles to meet targets. The moves were necessary to keep the flow of funds coming under a European Union-led 110-billion-euro bailout last year.

New measures that will have an impact on revenue in the latter half of the year include an increase in value-added tax on restaurants and cafes, to 23 percent from 13 percent.

The deficit goal for this year is 7.5 percent of gross domestic product from 10.5 percent in 2010. The economy is expected to shrink 3.8 percent, according to European Commission data released on July 4. That follows a 4.4 percent contraction last year.

Final central government data are due around August 20.

[Bloomberg]