ECONOMY

New measures may follow deep decline, hints Venizelos

Finance Minister Evangelos Venizelos admitted on Friday that the recession will be far worse than forecast this year – exceeding 4.5 percent – and did not rule out taking extra measures in view of the deteriorating situation. The only way to avoid this would be by moving the goalposts for the deficit after negotiations with Greece?s creditors.

The target for a budget deficit of 7.6 percent of gross domestic product now seems more distant than ever as the new data regarding the 2011 recession create a hole of 2.5-3 billion euros in the budget that takes the deficit to 8.5-9 percent of GDP.

The ministry?s latest recession estimates for the end of the year put it at between 4.5 and 4.7 percent, against an original target of 3.8 percent, while there are fears it may even reach up to 5.2 percent.

This will clearly have a negative impact on the execution of the state budget, while revenues are set to slip further away from the budget target. There is even going to be a problem with expenditures, particularly in covering the requirements of social security funds and the Manpower Organization (OAED).

Social security contributions have dropped, which means that the state will need to bolster the funds to avoid any problems in the payment of pensions and their general operation. The rise in unemployment is weighing heavily on OAED, as it remains unknown how high the jobless rate will be this year, after soaring to 16.6 percent in May.

Venizelos told Skai Radio on Friday that new measures are not unlikely, as the country needs to meet the targets of the midterm fiscal program. He did set a limit though, suggesting that ?we are not going to put an additional burden on medium and low incomes.?

All the signs suggest the government will try to negotiate a change in the budget targets with low-level representatives of the country?s international creditors the European Union, European Central Bank and International Monetary Fund on Monday.

The government?s argument will be that the blame for making a wrong estimate is shared by both Athens and its lenders? higher representatives, known as the troika, in the hope that new measures will be avoided in the last quarter of the year.