Deficit beats target, but at a price

Finance Ministry data for the first half of the year show that Greece?s budget deficit and primary deficit figures continued to beat their targets, although revenues remained in the red and payments to third parties all but ground to a halt.

The state budget deficit for the January-June period stood at 12.31 billion euros, against a target of 14.8 billion euros, while the primary deficit came in at 3.1 billion euros, compared to a target of 5.26 billion, the official data released on Tuesday showed. However these savings have come at the expense of growth, as the failure to make payments to third parties means that the market is being starved of cash just as it needs it most.

Net budget revenues in the year?s first half lagged the target by 987 million euros as they amounted to 21.8 billion euros, with the target at about 22.8 billion. Last year revenues up to June 30 had totaled 22.03 billion euros.

The ministry noted in a statement yesterday that the revenue drop is due to the postponement of the submission deadline for tax statements, which resulted in a lag in income tax receipts (by 844 million euros). Transaction tax receipts have missed the target by 530 million euros due to the drop in domestic demand, while the collection of taxes from previous years also missed its target.

The deficit is smaller than expected due to the freeze on payments to third parties, while June was one more month in which spending for the Public Investment Program was considerably reduced. Tax returns to businesses were even smaller than the target of 1.67 billion euros in H1, amounting to 1.57 billion — 1.2 billion euros less than last year.

Budget spending came to 35.6 billion euros in the year to June 30, which was 3.96 billion euros below the target set by the supplementary budget. Primary spending came to 23.8 billion euros (the target was for 15.3 billion), with the Public Investment Program being slashed by 1.6 billion euros in the first half of the year compared with 2011.

Meanwhile the Bank of Greece announced on Tuesday that the central government cash deficit fell to 6.5 billion euros in the first half of the year, compared with 13.2 billion euros in the same period a year earlier.

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