Budget and debt plans on target

Nine-month budget data indicate that the Greek government is on target to meet its deficit reduction plans for 2010 despite the shrinking economy weighing heavily on revenue growth. The Finance Ministry said yesterday that the budget deficit for the January-September period this year had been cut by 31 percent to 16.2 billion euros, slightly ahead of the 29 percent target. The result is mainly due to a reduction in expenses, the ministry said in a statement, adding that a corresponding increase in revenues had not been achieved, as the additional measures have yet to fully bear fruit. With the economy moving deeper into recession, efforts to improve Greece’s fiscal health have focused on cost-cutting, due to revenues trailing well behind targets. Primary expenses in the nine-month period were cut by 11.6 percent on an annual basis to 36.7 billion euros, beating the 9.2 percent target. On the revenue side, income increased 3.6 percent to 36.5 billion euros, missing the annual target of 8.7 percent. After reaching the brink of bankruptcy earlier this year, the government is aiming to reduce its budget shortfall for 2010 to 7.8 percent of gross domestic product, from 15.8 percent last year. An expected revision of 2006-09 budget figures by Eurostat, the European Union’s statistics service, next month may hold some unpleasant surprises for the Greek government, but Finance Minister Giorgos Papaconstantinou insists that the changes will not result in any additional austerity measures for 2010. The revised figures are scheduled to be released on November 15, the EU said yesterday. Progress made so far on the fiscal front has helped to improve investor sentiment regarding Greek debt. Rates demanded by investors to hold Greek 10-year bonds remain very high, as the spread – or interest rate difference – compared to benchmark German 10-year-bonds has narrowed significantly recently. In comments to journalists in Vienna yesterday, Ajai Chopra, acting director of the International Monetary Fund’s European Department, said that Greece is «very much on track» to return to international bond markets in the next 12 to 18 months. He also said that the IMF agrees with Greece’s government that the costs of restructuring Athens’s public debt load would outweigh any benefits.

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