October 2, 2011
Greece is likely to miss the deficit targets agreed as part of July's bailout package, which would cast further doubt on its ability to steer safely through its current financial crisis and will send new tremors through global financial markets.
As the country's cabinet agreed a controversial plan to begin laying off 30,000 state workers, its latest budget plan reportedly indicated a deficit of 8.5% of GDP this year, missing the 7.6% target agreed with the European Union and the IMF. In 2012 the deficit is expected to fall to 6.8% of GDP – above the year's 6.5% target. A recession that has been worse than expected is behind much of the increase. According to Reuters, Greece expects its economy to contract by 5.5% this year and 2% next.
But the deficit shortfall means Greece would need another €2bn finance this year. It will put more pressure on the prime minister, George Papandreou, as he meets inspectors from the European commission, IMF and European Central Bank – the "troika" – who are inspecting the country's books before deciding whether to approve the next $8bn of bailout money. Without the funds, it would struggle to pay state wage bills within weeks.
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