Fresh warnings from EU and IMF

After the unexpected cut in May?s 5.2-billion-euro tranche this week, it now appears that the disbursement of the June installment of Greece?s bailout package is in doubt due to the political uncertainty in the country.

A German Finance Ministry spokesman said on Friday that there should first be a positive report by the inspectors of the European Commission, the European Central Bank and the International Monetary Fund (known collectively as the troika) before the next tranche of 4 billion euros is released, which had originally been scheduled for the end of next month.

Similarly, the IMF has noted that it will not disburse its share of the tranche before its inspectors have issued a favorable report.

This has resulted in Athens halting the settlement of domestic dues and containing its outgoings to the payment of salaries and pensions. Already in April it reduced its expenses by 924 million euros. The size of the problem becomes evident when one takes into account the continuing lag in revenues, which has been aggravated by the governmental vacuum of the last few days.

According to the January-April data released on Friday by the Finance Ministry regarding the execution of the state budget, net revenues came in at 14.6 billion euros, or 335 million euros off target. The biggest problem is in the collection of value-added tax, which was hit by a 435-million-euro shortfall.

On the other hand, primary expenditure came down to 16.3 billion euros, from a targeted 17.2 billion. The state has curtailed the Public Investment Program over this period by 929 million euros, with an obvious impact on growth. As a result the primary deficit has beaten expectations, as it amounted to 1.6 billion euros against forecasts for 3.2 billion.

Bank of Greece data showed that in April revenues dropped to 3.30 billion euros, from 3.53 billion in the same month last year, while expenditure went down to 4.9 billion euros from 5.5 billion in April 2011.

The government had been aiming at revenue growth of 2.6 percent this year from last, but the considerable decline seen in the first few days this month is making this ever more unlikely.