Deficit for 2008 closes at 5.7 pct

The Greek economy had been sending clear signals of a sudden slowdown since last year, but the Economy Ministry only notified Eurostat a few days ago. According to data forwarded by the National Statistical Service to its European counterpart a week before the general elections, last year’s budget deficit closed at 5.7 percent of gross domestic product, compared to the figure of 5 percent projected by the ministry. Public debt rose to 99.8 percent of GDP from an estimated 97.6 percent. Despite the fact that the 2008 deficit was higher than expected, the ministry had insisted on an optimistic scenario for 2009, but it was hardly realistic. Its estimate for this year, as forwarded to Eurostat, envisages a deficit of 6 percent of GDP and debt of 107 percent of GDP. The ministry’s estimate that the deficit rose this year by just 0.3 percentage points has generated some ironic smiles in Brussels. Based on the latest data available for the budget’s execution in the first eight months of 2009, the European Commission estimates the deficit will exceed 8 percent this year, or possibly even 9 percent, while debt will reach 110 percent of GDP. This is vindicated by the figures for 2008. This major revision of the country’s underlying financials is dealing another blow to the country’s credibility, after the downward revision last month of 2008 growth from 2.9 percent to just 2 percent. This comes as the European Commission is preparing its fall forecasts that will be published on November 3. In order to gain a clearer picture of the country’s economy, some of its officials will visit Athens next week and meet with the new finance minister. Next Monday will see the Eurogroup meeting in which Greece’s new minister will take part and brief his counterparts on the first draft of the 2010 budget. It is quite likely that the Commission will agree to a year’s extension (until 2011) for Greek figures to revert to the desired levels.