October data call for more action

The latest budget data concerning the first 10 months of the year has increased the government’s concerns regarding the course of the economy, as the hole still left to plug amounts to 2 billion euros. Finance Ministry data released yesterday on the January-October period indicate state revenues will amount to just 40.9 billion euros, meaning that, in the remaining 60 days to the end of the year, the state will need to find 11.8 billion euros to stay within the forecasts for the existing draft budget for 2011. The ministry is fully aware that the maximum amount that can be collected in this period will not exceed 10.7 billion euros, meaning that 2010 will lag by at least 1.1 billion euros, affecting the deficit of both this year and next. Brussels and the International Monetary Fund have also been partly following the situation, hence their demand for strengthening the tax-collection mechanisms that have been in active for some time. Yet even the target of 10.7 billion euros appears particularly high. Ministry officials put the revenue lag at a minimum of 2 billion euros, which will entail a cut in the public investment program by 800 million euros. At any rate, the target of reducing the deficit to just 18.5 billion euros for 2010 is now history. Unofficial data from the Finance Ministry show that in October the state cashed in 4.4 billion euros, which is just 2.3 percent higher than in October 2009. In the first 10 months of the year, the revenues have shown a 3.5 percent increase, against a target of 8.7 percent growth. Greece’s lenders are therefore considering asking Athens for new tough measures not for the rest of this year but in 2011, in order to cover the revenues lost in 2010 as well as offsetting the increase in the 2009 deficit and the losses from the economy’s expected deeper recession in 2011.