Budget gap gets bigger

Greece’s ordinary budget deficit widened 45 percent in January to November 2007 compared to a year earlier, the Finance Ministry said yesterday, straining the country’s effort to further shrink its fiscal gap. The ordinary budget plus the government’s public investment program make up the central government budget, a subset of the general government budget, whose deficit must be kept under a European Union ceiling of 3 percent of gross domestic product. The general government budget comprises the central government budget plus defense spending and transfers to the social security system and other public entities. Greece was removed from the EU’s list of budgetary offenders in the summer of 2007 after shoring up its public finances. The government is targeting a deficit of 1.6 percent this year versus a projected 2.7 percent gap in 2007. After under-reporting its budget deficit to Brussels for years, including in 2001 when it joined the eurozone, Greece tightened spending and boosted tax revenues to bring the gap to under the EU’s cap. The ministry said the rise in the ordinary budget shortfall to -9.7 billion came as ordinary budget revenues rose 5.4 percent year-on-year, below the government’s 6.6 percent annual target. It said primary spending rose 10.8 percent in the 11-month period, while total ordinary budget outlays increased 9.1 percent, below a 9.8 percent government estimate. Debt servicing costs rose 2.8 percent. «The central government budget deficit outcome in the 11 months to November slightly exceeds the official full-year projection of -9.4 billion,» said economist Platon Monokroussos at EFG Eurobank. «In the absence of offsetting factors in the full-year outcome, we may see a slight overshooting of the 2.7 percent overall deficit target, but it is expected to stay below the European Union’s 3 percent threshold.» The general accounting office said widening of the gap was due to higher-than-expected spending due to relief efforts after summer wildfires last year and the settlement of outstanding state liabilities to Olympic Airlines. The one-off transfer of funds to the EU after an upward GDP revision also weighed. (Reuters)