Thursday

6th Oct 2022

EU staff to head to Greece amid deficit reports

EU officials are preparing to make their way to Greece this week amid reports that the country's 2009 budget deficit may have topped already dire earlier forecasts.

With an expected touchdown in Athens this Wednesday (6 January), staff from the European Commission and the European Central Bank will be keen to hear how the eurozone country with the largest deficit plans to rectify the problem.

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  • Greece's debt level is expected to exceed 125 percent of its GDP this year (Photo: Flickr)

The probing visit comes amid reports that the southeastern EU country has exceeded an already gloomy budget forecast for 2009.

According to Greek financial website Ta Nea, the country's deficit last year may have reached 14.5 percent of GDP, largely due to falling tax revenues. The deficit figure is even higher than the 12.7 percent revealed by the Greek Socialist government in November.

Athens is due to submit a budget report - known as a stability report - to the European Commission before the end of this month, as eurozone finance ministers prepare to discuss the issue at their regular monthly meeting on 15-16 February.

Under EU rules, member state deficits are not permitted to exceed three percent of GDP, although the vast majority are currently in breach of this threshold due to the financial crisis.

"There is close cooperation with the European Commission to avoid any danger of rejecting our stability programme, something which would be catastrophic," said Greek government spokesman George Petalotis.

The finance ministers' meeting comes just days after a planned informal reunion of EU heads of state, which the new permanent president of the European Council, Herman Van Rompuy, has announced will take place on 11 February.

Economic issues are set to dominate the meeting, with the subject of deficits likely to be aired.

The government of Prime Minister George Papandreou, elected in October following promises of higher spending and wages, is trying to persuade investors it can cut its deficit over the coming year.

An upward revision of the country's expected 2009 deficit by the new government shortly after the elections sent investors into a panic, prompting credit rating agencies to cut the Greece's debt rating.

Athens has promised to cut its deficit by four percent this year, hinting recently it may make further cuts of one billion euros.

However analysts point to the 'one-off' nature of the government's initiatives, including asset sales, sin taxes, a 90 percent levy on bank bonuses, and a clamp-down on tax-evasion – rather than measures to tackle the country's bloated structure of state spending.

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The European watchdog for systemic economic risk last week warned of "severe" threats to financial stability — but internal notes show top-level officials expressed "strong concerns" over the "timing" of such a warning, fearing publication could further destabilise financial markets.

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