Budget deficit widens further

As the recently appointed Socialists take control of government ministries, data released in the last few days show that Greece’s budget deficit is growing day by day with yesterday’s central bank estimate now placing the figure at 12 percent of gross domestic product. Only a month ago, Yiannis Papathanassiou, the previous economy and finance minister under the conservatives, said in an interview to Bloomberg that shrinking tax revenues will push the budget shortfall to 6 percent of GDP versus a revised estimate of 3.7 percent. Since then senior government officials have leaked to the press that the figure could be around 8 percent while Bank of Greece Governor Giorgos Provopoulos said in Istanbul on Tuesday the figure could be 10 percent. Provopoulos, who met yesterday with Finance Minister Giorgos Papaconstantinou, told reporters that the deficit could eventually be above 12 percent of GDP. «With the current data and dynamics that are being shaped, one could estimate with relative certainty that the deficit will reach 12 percent and possibly exceed this level,» he said. The growing deficit not only highlights Greece’s deteriorating public finances but also shows the government’s lack of margin for jump-starting the economy, which is heading for its first recession in 16 years. A senior government official said this week that the economy is now seen contracting by 1.5 percent this year, as opposed to the previous official estimate of around 1 percent. The International Monetary fund said in its recent global outlook that it expects Greece’s 250-billion-euro economy to shrink by 0.8 percent year-on-year in 2009, ahead of negative growth of 0.1 percent next year. A team from Eurostat, the European Commission’s statistical service, is expected in Athens next week to check forecasts sent to Brussels last month by the previous conservative government on Greece’s budget figures.