13th Aug 2022

Greek debt higher than expected, EU audit reveals

  • Greek protests are scheduled for the evening as officials from the Troika arrive in Athens (Photo: Aster-oid)

Greece has incurred a much larger budget deficit and levels of public debt than the country had earlier estimated, EU audit figures revealed on Monday (15 November) morning, in an adjustment that could kick off another round of sell-offs not just in the Greek bond market but in those of other creaking eurozone peripheral states.

The republic's budget deficit for 2009 amounted to 15.4 percent of gross domestic product, according to numbers from Eurostat, the EU's audit office, sharply up on its earlier estimate of 13.6 percent, as government cuts and increased taxes fail to deliver growth.

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The ratio of deficit to GDP for the country is the highest in the eurozone and the EU as a whole, even though Ireland is in 2010 expected to leapfrog Greece due to the cost of bank rescues.

The country's overall public debt meanwhile amounted to 126.8 percent of GDP, also up from the 115.1 spring estimate from Eurostat.

The upward revision on both figures had been expected means that Greece is unlikely to be able to meet its promised deficit reduction for 2010 to 8.1 percent.

In April, Greece signed up to a three-year €110 billion bailout package from the EU and the IMF. In return for the cash, Athens agreed to impose a four-year austerity package of swingeing cuts under requirements that it chop its deficit to 8.1 percent in 2010, 5.6 percent next year and 2.8 percent in 2012.

In the wake of the news, the Greek finance ministry said in a statement that its deficit for 2010 will be 9.4 percent of GDP.

On the weekend, Prime Minister George Papandreou said the expected revision could mean a further round of austerity measures and the country may seek to extend the payment schedule of the EU bailout monies

However, with the existing austerity measures having provoked widespread social unrest, the government may be reluctant to impose reduce social services, slash wages or to increase taxes still further, so could instead delay infrastructure projects.

The 2011 budget is due to be presented to the parliament on Thursday, where the government is set to announce further cuts worth some €4.5 billion.

On Tuesday, the country is to hold an auction on some €300 million worth of 13-week bonds.

The grim news from Brussels came as the 'troika' of officials from the European Commission, the European Central Bank and the International Monetary Fund descended upon the Greek capital as part of their regular inspections of the government's implementation of the conditions of its loan agreement.

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