Budget woes keep growing

Data on Greece’s budget so far this year show that the government is likely to miss its fiscal targets for 2009 despite the hopes of the Economy and Finance Ministry for a late turnaround in the year. Data for the first seven months of the year show revenues are 3.8 percent lower than in the same period in 2008 as opposed to a targeted rise of 14.7 percent for the year. In other words, there is a budgetary shortfall in excess of 5 billion euros. At the same time, data show that there has been an expenditure overshoot with spending in the January to July period jumping 22 percent, beating the annual target for a 9.7 percent rise. Economy and Finance Ministry officials are hoping for an improvement in the last four months as they expect the latest round of tax hikes to start filling state coffers. In a bid to help boost sagging revenues, the Finance Ministry announced in June tax hikes on fuel, mobile phones, lotteries and cars with engines with capacity higher than 2 liters, among others, as part of an effort to glean an additional 2 billion euros for state coffers. However, the downturn in the economy will limit the extent of the possible revenue turnaround. Greece’s economy in the second quarter of the year contracted by 0.2 percent, shrinking on an annual basis for the first time in 16 years. The government is looking to Brussels for some flexibility in handling the budget blowout, hoping the European Commission will grant it a one-year extension for lowering the deficit to below 3 percent of gross domestic product. Sources said that Brussels is likely to be open to the proposal on the condition that structural changes are completed that will help boost Greece’s lagging competitiveness. Additionally, EU officials will need to be convinced that the Greek government is not hiding any figures that could further widen the budget deficit in a few months’ time.