Budget hole keeps getting bigger

Greece’s budget deficit continued to widen in the first nine months of the year, with falling revenues pushing the shortfall to more than 6 percent of annual economic output. According to sources, revenues fell by 2.5 percent in the January-September period versus a growth target of 14.7 percent. This has resulted in the widening of the budget deficit to more than 6.5 percent of gross domestic product as opposed to a previous government target of 3.7 percent. The deficit is likely to be larger than the recently revised 6 percent figure announced by Economy and Finance Minister Yiannis Papathanassiou. Papathanassiou, who admitted last week that the economy could show a small rate of contraction this year, said Greece will ask for an extension from the European Commission in which to lower its budget deficit to below 3 percent of GDP. The country risks sanctions by the European Commission if it cannot meet a 2010 deadline to trim the deficit to within the EU’s 3 percent of GDP cap. The government is expected next week to update the European Commission on its revised budget targets. Based on these newly revised figures, Brussels is expected to decide how much time will be given to Greece to reduce its deficit. Sources pointed out that a sharp drop in imports, resulting from falling consumption rates, has dragged customs duties lower by some 7 to 8 percent in the last few months and this has contributed to the slide in budget revenues. On the spending side, expenditures have beaten the targeted figure by some 15 percent. The day after the October 4 national elections, the International Monetary Fund is scheduled to make public its forecast on the Greek economy, which will be more unfavorable this time around than the report released at the start of the year.