ECONOMY

Closely watched deficit shrinks

Greece’s budget gap shrank 32.2 percent in the first eight months of the year, beating a 26.5 percent target for the period, as cuts in state wages and pensions offset slower-than-expected increases in revenues, the Finance Ministry said yesterday. The deficit, which doesn’t include spending by state-owned institutions and companies, contracted to 14.5 billion euros from 21.4 billion a year earlier. The government is targeting an annual decline of 39.5 percent, the ministry said. Final figures are due later this month. «Deficit reduction in the last two months slowed down temporarily due to the high accumulation of interest payments,» which came to about 40 percent of the planned annual amount, and «on a lack of revenue,» the ministry said in a statement. Net ordinary budget revenues rose 3.3 percent, compared with a targeted 13.7 percent annual increase, as the economy enters deeper into recession. Data showed on Wednesday that the Greek economy contracted in the second quarter of the year by a more than originally estimated pace of 1.8 percent from the first quarter and 3.7 percent rate from a year earlier. The Association of Greek Car Importers (SEAA) estimated yesterday that the slide in car sales will result in government income from car taxes in 2010 falling to 640 million euros, from 1 billion in 2009. The government is targeting revenues of 1 billion euros from the sector for the full year, SEAA added. Ministry data showed that spending in the eight-month period fell 7.7 percent compared with an annual 5.5 percent decrease target, the ministry added. «Based on the deficit reduction so far and on expectation about revenues and expenditures to December, the end-year target of a 39.5 percent deficit reduction in 2010 compared to 2009 will be met in full,» the ministry said. Greece has pledged to slash its deficit to 8.1 percent of gross domestic product in 2010 from 13.6 percent last year, in exchange for a 110-billion-euro bailout from the European Union and International Monetary Fund that saved the debt-laden country from a debt crisis that shook the euro. The European Union, International Monetary Fund and European Central Bank said last month that more attention is needed to strengthen tax administration and secure revenues.