February 25, 2024

Deficits Higher Than Expected in Greece and Portugal

BRUSSELS — Almost a year after it adopted sweeping austerity measures as a condition of an international rescue package, Greece has failed to get a grip on its public finances, according to new data released Tuesday, increasing fears that the country may have to restructure its huge mountain of debt.

Greece’s deficit was 10.5 percent of gross domestic product in 2010, according to Eurostat, the European Union statistics agency. The deficit exceeded the 9.6 percent target set last autumn by the government and the European Commission, the E.U.’s executive arm. Public debt swelled to 142.8 percent of G.D.P, Eurostat said.

The figures will be seen by some critics as a vindication of the argument that austerity measures — imposed as part of the €110 billion or $160 billion bailout last May by the E.U. and the International Monetary Fund — are stifling the growth that Greece needs to put its finances back in order.

The Finance Ministry said Tuesday that Greece failed to meet its targets because “the impact of the recession on G.D.P. in 2010 was larger than anticipated,” as was the deterioration in tax receipts and a reduction in social security contributions because of high unemployment.

It said the government remained “committed to achieving” its target of reducing the deficit by 2014 to below 3 percent of G.D.P, the ceiling under E.U. rules for euro zone membership.

E.U. finance ministers have sought to ease Greece’s plight by extending the maturity period of its loans and agreeing to reduce the interest rate it has to pay.

But E.U. officials have ruled out a debt restructuring, pointing out that, among other measures, Greece has committed to raise €50 billion by 2015 through sales of state assets.

“The Greek authorities have shown they are determined to do what is necessary to fulfill the elements of the program,” Amadeu Altafaj-Tardio, a spokesman for the European commissioner for economic and monetary affairs, said Tuesday. Greece’s progress will be reviewed again in mid-May, he said.

Ireland, which has also received international aid, posted a budget deficit of 32.4 percent of G.D.P. in 2010, exceeding the 32.3 percent forecast because of the country’s huge bank bailouts, Eurostat reported.

Portugal, which is negotiating its own rescue, had a deficit of 9.1 percent, higher than the 7.3 percent the commission had predicted last year.

Most other euro zone countries managed to cut their deficits faster than predicted, Eurostat reported.

Spain’s deficit was slightly lower than forecast, at 9.2 percent of G.D.P. Because of the size of the Spanish economy — the fourth-largest in the euro zone, after France, Germany and Italy — investors and E.U. leaders have watched it closely for signs of weakness.

Those fears seem to have receded as Madrid has met its deficit targets. A sale of €1.97 billion in Spanish Treasury bills was well received by investors Tuesday, although at slightly higher interest rates than a similar sale in March.

Britain, which is not in the euro zone, recorded a budget deficit of 10.4 percent of G.D.P., the third highest in the European Union behind Ireland and Greece, Eurostat reported.

Article source: http://www.nytimes.com/2011/04/27/business/global/27euro.html?partner=rss&emc=rss

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