Greece’s international auditors have told the government it must adopt a further EUR2 billion in fresh austerity measures early next year, a local newspaper reports, amid signs that the country will miss its revised 2011 budget targets.
Last week, Greece began initial talks with officials from the European Commission, the International Monetary Fund and the European Central Bank–known locally as the troika–on the outlines of a new EUR130 billion loan deal.
The troika is due back in Athens Jan. 15 to resume talks on that deal. But according to the online version of the Kathimerini newspaper Monday, the troika has also demanded further deficit-cutting measures as a precondition for agreeing to the new loan deal.
Recent data suggest Greece is unlikely to meet even its upwardly revised deficit targets for this year because of a deeper-than-expected recession. Greece’s economy now looks likely to contract by at least 6% this year and 3% next year–worse than official forecasts.
In turn, with tax collections slumping and social transfers rising amid the recession, deficit targets look shaky. Those targets were for a budget deficit of around 8.5% of gross domestic product, or about EUR17.1 billion in 2011, but which the government now sees settling closer to 9% of GDP and EUR19.68 billion.
Many economists say a 10% deficit is more likely, while some say the economy may shrink by more than 6% this year.
EasyForexNews Research Team