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Greece to Miss Deficit Targets Imposed by Lenders as Part of Bailout

Greece won't meet 2011-2012 deficit targets imposed by international lenders as part of the country's bailout, the Finance Ministry said Sunday.

The country's deficit this year is expected to reach 8.5 percent of gross domestic product, or euro18.69 billion ($25.2 billion) -- higher than the targeted euro17.1 billion ($23.1 billion), which would have been 7.8 percent of GDP, the ministry said.

Greece has been reliant since May 2010 on regular payouts of loans from a euro110 billion ($150 billion) bailout from other eurozone countries and the International Monetary Fund. It was granted a second euro109 billion package in July, but details of that deal remain to be worked out.

The Finance Ministry said the missed target was because of a deeper-than-expected recession, with the economy contracting by 5.5 percent instead of the 3.8 percent estimate made in May. It implied the deficit could even exceed this level by the end of the year unless all new austerity measures were implemented.

"The final estimate for a deficit equal to 8.5 percent of GDP can be achieved, if there is a proper response by the state authorities and the citizens themselves, on whose stance the country's financial ... and social future depends," the announcement said.

The announcement reflects the government's frustration with tax collection, which they blame on tax inspectors' lax performance, and its fear that citizens, angry at seeing their wages shrink and, at the same time, having to pay an increasing amount of one-off taxes, would refuse to pay.

There are already widespread calls not to pay a property surcharge, to be included in the next batch of state electricity company bills, despite the fact that delinquent payers are threatened with having their houses disconnected from the grid. The government hopes that revenue from the property levy will raise about euro2 billion ($2.7 billion) in 2011 and a similar amount in 2012.

The 2012 budget is projected to reduce the deficit to euro14.68 billion ($19.82 billion), or 6.8 percent of GDP. Excluding serving Greece's debt, the budget is projected to have a primary surplus of euro3.2 billion, or 1.5 percent of GDP, meaning that Greece's debt will stop growing, as a percentage of GDP.

The Cabinet also was also expected to approve a plan to cut civil service staff by about 30,000 by the end of the year. It is still in session.

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