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02 September 2011

WSJ: Greece forecasts problems with budget-deficit goals


Greece is likely to miss its budget-deficit targets this year in the face of a deep economic contraction that is turning out to be even more severe than forecast. The country is likely to face demands for still more budget cuts.

Greece's deficit could exceed 8.5 per cent of GDP, compared with an official forecast of 7.6 per cent, as the government struggles to meet revenue goals, two senior Greek government officials said. The deficit is now estimated at "around 8.5 per cent, or a bit higher. Tax collection remains the main problem", one official said. "Many simply don't have the money to pay taxes. We have to get the economy going but the austerity is holding everything back."

Greek Finance Minister, Evangelos Venizelos, has already publicly acknowledged that Greece's recession may cause the government to overshoot its deficit forecast this year. The government expects the economy to contract 4.5 per cent to 5.3 per cent in 2011, compared with a previous forecast of a 3.9 per cent decline, and the government now admits the recession may run into next year. As Greece's budget struggles intensified, an indication of debt travails elsewhere in the eurozone came with Spain's sale of less than the maximum planned €4 billion ($5.75 billion) of five-year bonds it auctioned Thursday. The government was able to sell just €3.6 billion of the bonds at an average 4.489 per cent yield.

Full article



© Wall Street Journal


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