Widening budget deficit points to more measures

Greece moved a step closer to having to take new austerity measures on Tuesday after its budget deficit figures for the first 11 months of 2011 suggested that revenues had fallen by about 3 percent, compared to a projected increase of 1 percent while spending shot up 6.2 percent against a planned decrease of 3.8 percent.

The data showed that Greece’s budget deficit continued to widen in November as austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes.

The central government budget gap widened 5.1 percent year-on-year to 20.52 billion euros ($27.1 billion) in the first 11 months of 2011, according to finance ministry figures.

The data refer to the state budget deficit, which excludes local authorities and social security spending. They do not coincide with the general government shortfall, the benchmark for the EU’s assessment of Greece’s economic policy programme.

The gap rose to 20.5 billion euros from 19.5 billion euros a year earlier, according to preliminary figures, which came in below a target of 21 billion euros set in the 2012 budget, it said. Final figures are due later this month.

Speaking on Monday, Finance Minister Evangelos Venizelos said that no new measures would be taken in 2012 as long as the government met its budget targets for 2011. Tuesday?s figures indicate that this is unlikely.

New Democracy?s alternate financial affairs spokesman Christos Staikouras said that Greece would have to wait until the end of February to find out its exact fiscal position as revenues from 2011 are still going to be collected at the beginning of next year. He said only then could a decision on further measures be taken.

Ordinary budget revenue declined 3.1 percent in the first 11 months as Greece?s recession weighed on tax collection. Spending rose 3 percent, or by 3.7 billion euros, boosted by a 20 percent increase in debt-servicing costs that added 2.6 billion euros to the bill, the ministry said.

Prime Minister Lucas Papademos?s 2012 budget, approved on Dec. 7, aims to reduce the fiscal deficit to 5.4 percent of gross domestic product from 9 percent this year. Efforts to trim the shortfall have deepened the recession, now in its fourth year.

The Organization for Economic Cooperation and Development expects the economy to contract 6.1 percent this year, more than the 5.5 percent forecast in the government?s budget.


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