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In Greece, Taking Aim At Wealthy Tax Dodgers

November 12, 2012 by Leave a Comment

LONDON — As controversy swirls around the failure of former Greek finance ministers to investigate a list of 2,000 suspected tax dodgers, the current government in Athens is taking a hard look at the foreign assets of those people and thousands of others.

In recent weeks, tax experts at Greece’s finance ministry have been scrutinizing the finances of about 15,000 Greeks to see if money they have sent abroad in the past three years — about $5 billion in all — exceeds the declared wealth on their tax returns, government officials say.

The government of Prime Minister Antonis Samaras is intent on cracking down on wealthy tax evaders as it tries to quell mounting public anger over a slate of austerity measures that the Greek Parliament last week passed by a thin margin. Early Monday, the government won approval for its 2013 budget, which, due in part to persistent tax evasion, must rely on a punishing mix of spending cuts and indirect tax increases to meet targets set by the country’s creditors.

The emergence of the “Lagarde list” of 2,000 individuals with overseas bank accounts — named after a list given to the Greek government in 2010 by Christine Lagarde, then the French finance minister and now head of the International Monetary Fund — and the failure of previous governments to act on it has outraged a generation of austerity-weary Greeks. It highlights as well a longstanding societal fissure between those forced to absorb an ever-increasing tax burden and those who escape the duty by sending money overseas.

The 15,000 names under investigation have been narrowed down from a master list of about 54,000 individuals. One might call it a Lagarde list on steroids — an up-to-date roster of lawyers, bankers, doctors, merchants and even farmers who for decades now have made up the cream of Greece’s tax-avoiding crop.

In the 2013 budget, the government forecasts 44 billion euros in tax revenues, the lowest figure since pulling in 42.3 billion euros in 2006.

While much of the blame for the lower intake can be directed at the economic collapse, the fact that revenues continue to decline three years into an austerity program in which improved tax collection has topped the reform agenda underscores the depth of the problem.

The government isn’t projecting how much the tax push might raise, and many citizens are skeptical that Greek officials will suddenly wrest billions from wealthy scofflaws.

But the initiative could not come at a more crucial moment. Having just barely secured parliamentary support for new austerity measures, in the coming weeks Greece must persuade its creditors to release 31 billion euros in fresh bailout loans or face bankruptcy.

At the root of the decline in tax collection has been the capital flight of Greece’s tax base.

Friedrich Schneider, an economics professor at Johannes Kepler University in Linz, Austria, estimates that about 120 billion euros in Greek assets lie outside the country, representing an extraordinary 65 percent of the country’s overall economic output. The assets abroad include bank deposits, real estate holdings and untaxed business income.

A frequent adviser to European governments and international financial institutions, Mr. Schneider says that 70 billion euros is in Switzerland, about 20 billion euros is in Britain, with the rest spread out in other places like the United States, Singapore and offshore tax havens like the Cayman Islands.

“All the rich people have sent their money out of the country,” said Mr. Schneider, who is perhaps the foremost expert on tax evasion and shadow economies in Europe. “That is why we have such unequal burden-sharing, with the average Greek having lost 40 percent of their income after taxes, while the wealthy have their money outside of Greece.”

The solution, as Mr. Schneider sees it, is not to heap more taxes on the country’s evaporating tax base or to use legal threats to pursue the offshore cash. Instead, he suggests a tax amnesty in which all outside money would be invited back — with no questions asked — and be subject to a flat tax of 15 to 20 percent.

Article source: http://www.nytimes.com/2012/11/12/business/global/greece-renews-struggle-against-tax-evasion.html?partner=rss&emc=rss

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In Compromise, Belgian Named as Top E.C.B. Economist

January 3, 2012 by Leave a Comment

FRANKFURT — The European Central Bank unexpectedly named Peter Praet, a Belgian, as its de facto chief economist, breaking a tradition of having German hard liners occupy the key policy-making post.

Mr. Praet, a former economist at the International Monetary Fund who has been a member of the E.C.B. executive board since June, will replace Jürgen Stark as head of the economics department. Mr. Stark resigned at the end of 2011 because he opposed the bank’s intervention in sovereign bond markets.

The appointment of Mr. Praet, 62, is part of a major shift in top management at the E.C.B. that could lead to a slightly less hard-line approach by the institution with the most direct control over the fate of the euro.

Jörg Asmussen, a former top-ranking official in the German Finance Ministry, moved to the E.C.B. effective Jan. 1. Benoît Coeuré, former deputy director general of the French Treasury, also joined the six-member executive board at the beginning of the month, replacing Lorenzo Bini Smaghi, an Italian.

Both Mr. Asmussen, 45, and Mr. Coeuré, 42, were said to have coveted the economics portfolio, and the choice of Mr. Praet appears to have been a compromise. A spokesman for the German Bundesbank declined to comment on the appointment.

The head of the E.C.B. economics department briefs members of the bank’s governing council on the state of the euro zone economy. As such that person can play an important role in setting monetary policy. Before Mr. Stark, the E.C.B.’s economics department was overseen by Otmar Issing, a forceful personality who played a major role in enshrining the bank’s focus on fighting inflation above all else.

The views of Mr. Praet, the former executive director of the National Bank of Belgium, are not well known, but he is unlikely to be as militant on inflation as his predecessors.

In any case, the economics position is not as influential as it once was, said Marie Diron, a former E.C.B. staff economist who now advises the consulting firm Ernst Young.

In part that is because the governing council, which includes national central bank heads, has a number of other members with economics degrees — not least Mario Draghi, who took over as E.C.B. president in November. Mr. Draghi has a doctorate in economics from the Massachusetts Institute of Technology.

The chief economist “is less powerful and less determinant than he might have been five years ago,” Ms. Diron said. “The president and other members are able to really provide quite deep economic insights and there is not so much reliance on the chief economist.”

Mr. Asmussen’s portfolio will include responsibility for the E.C.B.’s relations with European governments. He played a similar role at the German Finance Ministry, and has been a main figure in negotiations on how to deal with the sovereign debt crisis. Mr. Coeuré will be responsible for the E.C.B.’s market operations, which currently include contentious interventions in bond markets.

Article source: http://www.nytimes.com/2012/01/04/business/global/04iht-ecb04.html?partner=rss&emc=rss

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Doubts Emerge After European Union’s Euro Deal

December 15, 2011 by Leave a Comment

The market bid the value of the euro down below $1.30 for the first time since January, and pushed the interest rates the Italian government must pay on new bond issues up again, apparently unconvinced that a little more austerity and a little more bailout money would save the euro.

The European Central Bank continued to face pressure to step up its purchases of euro zone government bonds. But the head of Germany’s central bank, the Bundesbank, Jens Weidmann, repeated that his country opposed using the European Central Bank too rashly to back up governments that need to reform themselves first. Mr. Weidmann also said the Bundesbank would provide new money as a loan to the International Monetary Fund only if countries outside Europe did so as well.

In a speech on Wednesday at the German Finance Ministry in Berlin, Mr. Weidmann called the Brussels deal “encouraging,” but insisted that the idea of “creating the necessary money through the printing presses” be abandoned. He spoke instead in the moralizing tones for which the Germans have become known during the crisis.

“It would be fatal to completely remove the disciplinary effect of rising interest rates,” Mr. Weidmann said. “When credit becomes expensive for states, the appeal of further borrowing sinks. Good fiscal policy must be rewarded through the credit costs, bad punished.” Rescue funds, Mr. Weidmann said, can accomplish only one thing: “Buying time, time that must be used to solve the fundamental problems.”

Meanwhile, at least four more European Union members — none of them using the euro — have expressed reservations about the agreement, which only Britain definitively opposed at the summit meeting. Some leaders said in Brussels that they wanted to consult their parliaments. Hungary, Sweden, Denmark and the Czech Republic now say they want to see the text of the proposed treaty, which is meant to enforce strict limits both on members’ annual budget deficits and on their cumulative debts, before fully committing themselves. France and Germany hope to have a draft of the treaty approved by the end of March and ratified by the end of 2012.

The fiscal strictures are meant to prevent future crises, but the financial markets appear to be much more focused on whether the euro zone nations will put their money where their mouths are now, when they say they will defend the euro and its members. Beyond the bailout funds already in place, the Brussels agreement calls for member nations’ central banks to provide 200 billion euros ($259 billion) to the I.M.F. to create a bigger “firewall” of money that would help protect heavily indebted euro zone states from speculative pressure.

The hope is that outside countries will contribute as well. In Brussels on Wednesday, a senior European official said Russia might provide up to 10 billion euros; Russia holds about 40 percent of its foreign-currency reserves in euros and wants a stable currency, the official said.

Some in Europe say more firepower is needed. Ireland’s European affairs minister, Lucinda Creighton, said in Paris on Wednesday that the European Central Bank should become a lender of last resort for the euro zone. “Having a fiscal compact in place by March is desirable, but I don’t think it’s going to save the euro,” she said.

What she wants, Ms. Creighton said, is “ideally a very clear declaration from the E.C.B. that it is prepared to do whatever is necessary to save the currency, and it is the ultimate backstop.” She added, “I don’t think we’re there yet, but I feel we will end up there.”

Germany, of course, disagrees.

The markets also appear to want more aggressive action by the European Central Bank while new prime ministers in Italy and Spain push through difficult economic changes. But the bank may also want to keep pressure on the Italian and Spanish Parliaments and governments to follow through. On Wednesday, Italy — with 1.9 trillion euros of cumulative debt — had to pay 6.47 percent annual interest to sell its five-year bonds, up from 6.30 percent last month, while Germany, perceived as safe, sold two-year notes priced to yield 0.25 percent, a record low.

Steven Erlanger reported from Paris, and Nicholas Kulish from Berlin. David Jolly contributed reporting from Paris, Alan Cowell from London, and Stephen Castle from Brussels.

Article source: http://feeds.nytimes.com/click.phdo?i=17e4b89f6641238ac8083a181a10e022

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Berlusconi Makes Surprise Pick for Bank of Italy

October 20, 2011 by Leave a Comment

Ignazio Visco, currently No. 3 official at the bank, was nominated to replace Mario Draghi as bank governor, just days before Mr. Draghi takes over the post of president of the European Central Bank.

The prime minister’s office said the nomination was made in a letter sent to the bank’s Board of Directors, which will meet on Monday to provide a non-binding opinion. President Giorgio Napolitano must formally ratify the appointment before it takes effect.

The decision comes after weeks of stalemate over Mr. Draghi’s successor. Mr. Berlusconi has struggled to assert authority over his increasingly fractious majority in Parliament amid the widening debt crisis that has wracked markets in Europe, with Italy within the crosshairs.

Although Mr. Visco had not been considered to be among the leading candidates for the job, initial reaction to his appointment was positive. Pier Luigi Bersani, leader of the main opposition Democratic Party, said Mr. Visco had the requisite “authoritativeness and autonomy” required to guide the central bank, the Ansa news agency reported.

Mr. Draghi is set to start at the E.C.B. on Nov. 1, taking over from Jean-Claude Trichet.

The selection of Mr. Visco, deputy director general of the bank since 2007, came as somewhat of a surprise after weeks of fervent — and turbulent — petitioning that ended in a three-way deadlock among Lorenzo Bini Smaghi, currently a member of the six-member executive board of the E.C.B.; Fabrizio Saccomanni, the Bank of Italy’s deputy governor; and Vittorio Grilli, director general of the Finance Ministry.

The French President Nicolas Sarkozy had lobbied strongly in favor of Mr. Bini Smaghi, whose appointment would have made room for a French national on the E.C.B. board. Mr. Saccomanni was favored by the Bank of Italy, while Mr. Grilli was backed by Mr. Tremonti, who has clashed recently with Mr. Berlusconi.

As the deadline for nominating a candidate drew closer, criticism over the government’s inability to fill the post went hand in hand with growing doubts over the government’s inability to confront the challenges posed by the debt crisis.

Critics say that the austerity measures passed this summer — meant to balance the budget by 2013 — are insufficient, and while the government pledged last month to quickly present wide-ranging measures to stimulate growth, it has yet to present anything concrete.

In a front-page editorial Thursday in Milan daily Corriere della Sera titled “A masterpiece of a mess,” the editor-in-chief Ferruccio de Bortoli said the delay in appointing the governor was a “glaring demonstration of a lack of leadership and even of national dignity.”

Mr. Visco, 61, rose to his current position from within the bank’s ranks. A native of Naples, he studied economics at the University of Rome and at the University of Pennsylvania, and joined the Bank of Italy in 1972.

Two years later he began working in the bank’s economic research department, becoming its head in 1990. From 1997 to 2002, he was chief economist at the Paris-based Organization for Economic Cooperation and Development and served as the Bank of Italy’s sherpa, or adviser, for Group of Seven and Group of 20 meetings.

Article source: http://www.nytimes.com/2011/10/21/business/global/berlusconi-makes-surprise-pick-for-bank-of-italy.html?partner=rss&emc=rss

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Far-Off Region Piles More Debt on Portugal

October 4, 2011 by Leave a Comment

But while he has managed over the past three decades to turn the islands from a poverty-stricken outpost in the North Atlantic into one of the country’s wealthiest regions, progress has come at a high price — one that is only now becoming clear.

Last month, the Portuguese Finance Ministry ordered an investigation of Madeira’s accounts after unearthing what it called “a grave irregularity” — €1.1 billion, or $1.5 billion, of debt that had been accumulated since 2008 but not accounted for.

The discovery of yet more debt — equal to 0.3 percent of Portugal’s gross domestic product — complicates life for the national government as it struggles to meet financial targets agreed to last May with international creditors in return for a €78 billion bailout.

Furthermore, the debt scandal provides investors with alarming evidence that governments in Portugal and other ailing euro economies are still struggling simply to calculate the extent of the damage to public finances from wayward regional governments and other local forces that are hard to control.

Similar problems have surfaced in Greece as well as in Spanish regions like Castilla-La Mancha, where a recently elected government accused its predecessor of understating its deficit and not accounting for €2 billion of unpaid bills to service providers.

“Madeira has become a major embarrassment for Portugal, and I believe that more undisclosed debt will come out,” said Michael Blandy, chairman of Blandy Group, one of Madeira’s largest companies, whose assets range from wines to hotels and also include a newspaper that has been critical of Mr. Jardim.

Indeed, Madeira’s debt estimates continue to creep up. On Friday, Vítor Gaspar, the Portuguese finance minister, announced that Madeira’s debt had reached €6.3 billion by the end of the first half, contradicting a recent figure of €5.8 billion from the local authorities.

International creditors have expressed dismay at such disclosures. Olli Rehn, the European commissioner for monetary affairs, called Madeira’s unaccounted-for debt “less-than-a-welcome surprise.” Moody’s, the credit rating agency, recently downgraded Madeira’s long-term debt to B3 from B1 because of “bad governance and management and poor budget performance.”

With Madeira’s election nearing, opposition politicians like Maximiano Martins, the Socialist Party leader here, claim Madeira is on the brink of default. Mr Martins, an economist by training, provided his own, even higher estimate of Madeira’s debt — €7.3 billion — with additional liabilities in the form of guarantees given to help local government-controlled companies issue more debt.

In addition, he said the government was about 1,000 days behind in paying some health service providers.

Mr. Jardim, a Social Democrat, has accused his opponents of overstating Madeira’s budgetary problems ahead of the election to knock him from power. He told supporters last week that while his government needed to plug a financial “hole,” the challenge could not be compared to the “crater” that the national government was confronting.

Lisbon has not accused Mr. Jardim or any other official of corruption. In an attempt to reassure creditors, Mr. Gaspar, the finance minister, called Madeira “an isolated case” of accounting malpractice. Still, the government in Lisbon is preparing a financial rescue for Madeira, due to be revealed after the election Sunday.

But critics claim that Mr. Jardim and his associates failed to rein in spending partly because, after 33 years in power, the division has been completely blurred between political and business interests in Madeira.

“The politicians pass laws in our Parliament in the morning and then do business among themselves in the afternoon,” Mr. Blandy charged.

Mr. Jardim’s popularity grew along with Madeira’s economy, as he used its status as an autonomous region to tap into extensive subsidies from Lisbon and the European Union.

Until Portugal’s return to democracy, Madeira lagged far behind the Portuguese mainland, with an economic output per person that was 40 percent of the national average, and an infant mortality rate of 36 percent.

“Some people lived in caves here,” said João Machado, Madeira’s regional tax director.

By 2008, however, Madeira’s 250,000 residents lived in Portugal’s second-wealthiest region, after Lisbon, according to the National Statistics Institute.

Article source: http://www.nytimes.com/2011/10/04/business/global/far-off-region-piles-more-debt-on-portugal.html?partner=rss&emc=rss

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Ireland Considers Using New E.U. Fund Too

October 1, 2011 by Leave a Comment

DUBLIN — In Ireland’s Finance Ministry, officials are engineering a maneuver that may make the difference between default and financial survival.

The impetus for the plan is the cost of bailing out Anglo Irish Bank and Irish Nationwide Building Society. Ireland paid an initial €31 billion, or $42 billion, to save the two lenders, averting what central bank governor Patrick Honohan called a “European Lehmans” in a nod to the collapse of Lehman Brothers in September 2008.

To cut the final bill of at least €48 billion, including interest, Finance Minister Michael Noonan may seek to exploit the euro region’s debt crisis by tapping the area’s expanding rescue fund. That would deliver money at lower interest rates and over a longer period than selling bonds, reducing what Mr. Noonan has called the “extraordinarily expensive” tab as the state seeks to win back economic sovereignty.

“Ireland is really on the fringe between debt sustainability and unsustainability,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin. “The cost of funding this every year could play a big part in the difference, ultimately, between the two scenarios.”

Ireland’s 10-year borrowing cost, which reached 14.22 percent in July, dropped below 8 percent on Wednesday for the first time this year, and is currently at a nine-month low of 7.53 percent. The cost of insuring against the nation defaulting for five years has dropped to 677 basis points from 804 during the past two months, according to CMA prices, implying a 44 percent probability of Ireland failing to meet its obligations.

The International Monetary Fund said on Sept. 7 that it expects Ireland’s general government debt to peak at 118 percent of gross domestic product in 2013, equivalent to almost €200 billion. That’s up from 25 percent of G.D.P. in 2007.

Ireland last year was forced to seek €67.5 billion of aid, after its banking woes became too big to handle alone. On Sept. 30, 2008, the then-government guaranteed most of the debts of its biggest banks, with the state agreeing to inject about €62 billion into the financial system to date.

As the bill for the two banks soared last year, then Finance Minister Brian Lenihan decided to hold off injecting all the money into the two banks straight away. Instead, he promised to give them the cash over 10 years, by issuing promissory notes to the lenders for the full amount.

That tactic avoided Ireland having to raise the money in one effort as its own borrowing costs surged. The banks in turn used the notes as collateral to borrow funds from the Irish central bank.

After being rebuffed by the European Central Bank on a plan to impose losses on senior bond holders in the two lenders, Mr. Noonan said he is turning his attention to an “alternative piece of financial engineering to the promissory note arrangement.”

“Rescuing Anglo helped maintain stability across the European banking system, but has put a heavy burden on the Irish state,” said Alan Ahearne, an adviser to Mr. Lenihan who oversaw the promissory note arrangement and negotiated the bailout accord. “Any arrangements to ease that burden would help Ireland to stay ahead of its program targets.”

The government pays an annual 8 percent to the banks on the notes, a rate Prime Minister Enda Kenny described this week as “penal.” The Finance Ministry a day later put the cost at €17 billion over 20 years.

“The goal is to reduce this interest charge,” said Mr. O’Leary at Goodbody. “This could potentially be done by agreeing an additional long-term loan from the E.U. with a lower interest rate.” In addition, the state has to pay interest on the borrowing to fund the bailout. For every €3.1 billion, that amounts to €115 million per annum, the ministry said, based on the rate Ireland’s partners are charging for its rescue fund.

On July 21, European leaders empowered the euro zone’s €440 billion rescue fund, the European Financial Stability Facility, to aid troubled banks by lending to governments to inject into lenders.

By taking a loan from the fund, Ireland could pay off the promissory notes, saving €17 billion instantly. More savings would flow, assuming the state could borrow at a lower rate from the European fund than investors would charge to make good on its capital pledge to the banks.

“The proposal will in effect raise the amount of borrowings from the E.U./I.M.F. by €30 billion which would be repayable at competitive rates most likely beginning in fifteen years,” said Jim Ryan, an analyst at Dublin-based Glas Securities, in a note. “From the government’s perspective, it delivers additional funding and ensures the funding burden for the state is probably manageable until 2016, without introducing private sector involvement.”

Ireland’s willingness to spare senior bank bondholders, in recognition that it could worsen a funding crisis for banks across Europe, may win him support.

“There is an argument that Ireland has taken one for the team in bailing out Anglo,” said Mr. O’Leary. “The country’s taxpayers are the fall guys as the bank’s senior creditors are spared.”

Article source: http://www.nytimes.com/2011/10/01/business/global/01iht-ireland01.html?partner=rss&emc=rss

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Greece Says Talks With Lenders End ‘Positively’

June 3, 2011 by Leave a Comment

ATHENS — After weeks of tense negotiations with its foreign creditors, Greece said Friday that a review of steps it had taken so far to meet the terms of its bailout had ended “positively,” marking a big step toward the release of a further installment of emergency funding.

In a statement, the Finance Ministry did not state explicitly whether the fifth transfer from its €110 billion, or $159 billion, package — this one valued at €12 billion — had been approved.

But it said that discussions with representatives of the European Commission, the European Central Bank and the International Monetary Fund “concluded today positively,” having covered additional measures needed to meet the 2011 deficit target, including privatizations and “structural reforms to restore growth and competitiveness.”

The ministry said the additional measures would be discussed by the government “in the coming days” before being voted on in Parliament.

In a separate statement, the commission, E.C.B. and I.M.F. said “the next tranche will become available, most likely, in early July.” But it added that more talks on financing would be held over the next few weeks, and the decision would still require approval by the I.M.F.’s executive board and the group of euro-zone finance ministers.

The European Union and I.M.F. pledged the emergency loans in May 2010 to rescue Greece from defaulting on its massive debt. In addition to deciding whether to release the latest tranche, they are also considering whether to extend additional loans of up to €60 billion to give Greece more breathing room while it struggles with a deep economic downturn.

Talks on those additional funds have been moving forward in recent weeks, although Greece’s lenders are demanding additional efforts to raise revenue and privatize state assets.

The Greek government is set to announce a new austerity plan that envisages raising €6.4 billion through spending cuts and tax increases this year, and raising another €50 billion by 2015 through privatizations.

The measures were expected to be outlined later Friday by the Greek prime minister, George Papandreou, who flew to Luxembourg for talks with Jean-Claude Juncker, the head of the euro group of finance ministers.

The announcement came amid mounting public opposition in Greece to an ongoing austerity drive and growing rifts within the ruling Socialist party, which has failed in two attempts to secure a broad political consensus for more austerity measures. E.U. and I.M.F. officials have pushed the government to get all political parties to sign on to the measures to ease the implementation.

The Socialist government has a comfortable, 6-seat majority in Parliament, but several Socialist lawmakers have suggested they might vote against the new austerity proposals. A letter sent to Mr. Papandreou on Thursday by 16 Socialist members of Parliament, framed the question being posed continually in the Greek media: “A year after signing the memorandum [last year’s agreement with Greece’s creditors] we are at a crucial juncture again. Why?”

Public opposition to the new measures has been evident. Thousands of Greeks, including many young people, filled the main square outside Parliament for a tenth day on Friday, calling on the government to revoke measures and for foreign creditors to “go home.” The protests have been small by Greek standards but are growing in intensity, and there have been sporadic incidents of stone-throwing at politicians.

Government officials have claimed that some of those incidents have been orchestrated by the Communist party and the radical left party Syriza, which are both represented in Parliament.

On Friday, members of the Communist-affiliated labor union PAME stormed the Finance Ministry offices, which are located opposite Parliament, and strung up a banner calling for “an organized overthrow” and strike action.

The country’s main labor union, GSEE, which represents around 2 million workers, has called a one-day strike for June 9 and is joining the civil servants’ union, which represents about 800,000 people, for a general strike on June 15.

Article source: http://feeds.nytimes.com/click.phdo?i=72a473e421dab2b4487d07d8ce0c9eb2

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Deficits Higher Than Expected in Greece and Portugal

April 26, 2011 by Leave a Comment

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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