ECONOMY

Deficit and debt holes get bigger

A closer look at 2009 budget data shows even larger holes appearing in Greece’s deficit and debt figures at a time when government efforts to improve the country’s fiscal health are beginning to be noticed. European Union statistics agency Eurostat is expected to revise significantly higher Greece’s 2009 budget deficit in an announcement expected toward the end of October, a senior government source said yesterday. The same source played down the impact on the 2011 budget, which was unveiled on Monday. Another source indicated that the 2009 shortfall will rise to 15.1 percent of gross domestic product from 13.8 percent previously stated. The change will also include an upward revision of government debt to 127 percent of annual economic output, versus 115.1 percent previously. With the fiscal figures for 2009 changing, this raises the questions of whether Greece can meet the ambitious targets set in the 2011 budget plan, which aims to lower the deficit to 7 percent of economic output in 2011 from the stated 7.8 percent this year. The upward revisions are due to the inclusion of money owed by state companies, such as the Hellenic Railways Organization (OSE), into general government accounts along with financial derivatives, called swaps, conducted by the government, the source added. Meanwhile, ratings agency Moody’s said yesterday that Greece’s drive to overhaul its public finances is impressive and the risk to the country’s sovereign rating forecast «is to the upside» if the reforms continue. «We’ve been impressed by what the Greek government has done in term of reforms,» Anthony Thomas, a London-based senior analyst at the ratings company, said yesterday at a credit conference in Warsaw, Bloomberg reported. «If that continues, the risk to the forecast is to the upside.» Moody’s cut Greece’s credit rating to noninvestment grade on June 14 as the country struggled to rein in the euro region’s second-biggest deficit. Moody’s cited «substantial» risks to economic growth from the austerity measures tied to a 110-billion-euro aid package from the European Union and the International Monetary Fund in downgrading the rating to Ba1 from A3. The premium that investors charge to hold Greek 10-year bonds rather than those of Germany, Europe’s benchmark, rose 1 basis point to 778 basis points.