ECONOMY

No sign of crisis bottoming out yet

Greece?s economy is heading for a nightmare contraction of 7 percent this year according to the Economist Intelligence Unit, raising fears that the country?s recession is nowhere near bottoming out anytime soon.

While the 2012 budget sees gross domestic product shrinking by 2.8 percent, the EIU forecast places Greece second only to Sudan in the global recession chart: The African country?s economy is expected to contract by 9 percent owing to oil reserve losses after the secession of South Sudan.

Even the most pessimistic projections of the International Monetary Fund had only seen a 3 percent contraction for Greece. And one must bear in mind that this year?s budget was also based on the assumption that the 2011 GDP would have shrunk by 5.5 percent, a figure which is now expected to be much higher.

Moreover, budget revenues at the end of last year were 1.3 billion euros short of the revised target, according to Finance Ministry figures. The extraordinary levies and the special property tax paid via electricity bills helped contain the problem created not just by the lagging revenues but also from excessive expenditure. All this means that the government will need to find ways of securing an extra 2 billion euros this year at least.

In December 2011 inflows to the state coffers amounted to about 6.1 billion euros, the highest monthly revenues not just for the whole of 2011 but also the last few years, and came as a result of the extra burden on taxpayers.

Nevertheless, no one knows yet the exact amount of tax returns for 2011. So far returns to taxpayers and enterprises have amounted to 5.14 billion euros and it is estimated that by the end of February another 500 million euros at least will have to be credited to the accounts of taxpayers, leading to a further swelling in the deficit closer to 10 percent of GDP.

For the whole of 2011 tax receipts amounted to 49.994 billion euros, down 1.7 percent from the previous year?s 50.857 billion.

The amount the government will need to recover through new measures this year will also depend on the finances of the cash-strapped social security funds and on debts to third parties.