ECONOMY

Big drop in 2009 GDP expected

BRUSSELS – The European Commission expects Greece’s budget deficit to have exceeded the 3 percent mark in 2008 and 2009 and is also predicting a sharp drop in economic growth for this year, according to a report it is scheduled to release today. This is likely to be the first step in the Commission launching the excessive deficit procedure against Greece and other European countries. Greece’s budget deficit last year is estimated to have reached 3.5 percent of gross domestic product (GDP), the same level as 2007, while in 2009 it is anticipated to have hit 3.7 percent of the country’s annual economic output. Like Greece, a number of other European Union countries appear to be in a difficult fiscal position, including Ireland and France, possibly also Malta and Portugal. Undoubtedly, the slowdown will also have a similiar impact on countries such as Germany. If, however, the EU’s estimates prove to be correct, then Greece will be in the most difficult position as its budget deficit for 2007 has already been confirmed at 3.5 percent. Growth is expected to drop off sharply in 2009, hitting almost zero, though avoiding a recession – two consecutive quarters in which an economy’s expansion rate is in negative territory – unlike a number of other countries. A decision to launch the excessive deficit procedure against Greece could be made next month, when the Commission issues its next report.