More austerity measures set to be announced

The government is about to announce new austerity measures totaling about 13 billion euros for next year, following the meeting that Greece’s creditors had with Finance Minister Giorgos Papaconstantinou yesterday in Athens. The measures will become public on Thursday, when the government tables the 2011 budget in Parliament, but their format has not yet been completed, according to sources. There already exists a provision in the memorandum Athens signed with the European Commission, the European Central Bank (ECB) and the International Monetary Fund for new measures up to 9 billion euros but, after yesterday’s meeting, the government is seeking ways to muster another 4 billion, as its lenders have refused to spread the additional budget deficit out over more than a year. New data from Eurostat showing that this year’s deficit is likely to come in at 9.4 percent of gross domestic product will create a hole of 3.5 billion euros, or 1.5 percent of GDP, which will have to be covered entirely within 2011. «The shrinking of the deficit will not happen with further cuts in salaries and pensions or tax hikes above those that we have already committed ourselves to. It will take place via the rationalization of state expenditure so that taxpayers’ money does not go to waste,» said ministry sources. ECB Vice President Vitor Constancio told a press conference in Vienna yesterday that it is vital for the country to maintain its focus on the 2011 targets for its fiscal streamlining. «What is important and we really expect Greece to comply with is to keep the same target for next year too, which will require taking additional measures that may have not been foreseen,» he stated. The target for an additional 13 billion euros for 2011 is based on Athens attaining the 9.4 percent budget deficit that Eurostat expects for 2010, though with a 2-billion-euro lag in state revenues in the first 10 months of the year this appears rather unlikely. The deficit at the end of the year may well exceed 10 percent, calling for even more additional revenues in 2011. Papaconstantinou will update his European counterparts today and tomorrow at the Eurogroup and Ecofin meetings.