Black hole in 2009 budget is expanding

The planned execution of the 2009 budget has been derailed by about 3.5 billion euros since the first half of the year due to soaring expenditures and declining public revenues. Well-informed sources at the Finance Ministry have suggested that revenues in the January-June period have been disappointing and say June showed no improvement over the previous months of the year, with problems continuing on the spending front as well. Revenues from the taxation of legal entities are showing a major decline, which is being attributed to the poor picture of the market and shrinking of corporate profits in the last 12 months. This also affects receipts from value-added tax, which have stagnated because tax evasion soars at times of crisis. The same sources argue that, although total revenues have not been confirmed yet, the figures will show a 1-2 percent decline in the first half of the year from the same period in 2008, against a target set by the government for 13.2 percent yearly growth. As far as spending is concerned, the forecast for containing flexible expenditures by 10 percent in order to save about 500 million euros does not seem to be materializing, as primary spending has already exceeded what was budgeted for the year’s first half. Expenditure in H1 has expanded by more than 20 percent, according to estimates, against an annual target of 9.1 percent.