Budget figures released this week show that the Greek government is on course to meet its ambitious 2010 fiscal goals, and slash the deficit by 40 per cent in just one year, but below-target revenue growth reflects the country’s deepening recessionary woes.
The budget deficit in the first half of the year fell 46 per cent on an annual basis to 9.6 billion euros, according to Finance Ministry data.
The drop outpaces the targeted 40 per cent reduction for 2010, raising hopes that the shortfall will drop to 8.1 per cent of gross domestic product, from 13.6 per cent in 2009, as agreed to in the memorandum signed with the European Union and the International Monetary Fund.
However, on the revenues front, the government appears to be struggling as net income rose 7.2 per cent between January to June, falling well short of the 13.7 per cent target.
Economists said the pace of revenue growth reflects plunging consumption and investment as the economy slides deeper into recession in the second and third quarters of the year after contracting by 2.5 per cent between January and March.
“Seasonal factors also play a large role in shaping state revenues. Income figures could change in just a few months,” said an economist from an Athens-based bank.
Austerity measures announced in May and March, which included cuts to civil servants’ pay and pensions and two consecutive value-added tax hikes, along with a massive reduction in the public investment program, have resulted in budget expenditures falling by 12.8 per cent to 30.1 billion euros, easily beating the 5.5 per cent target.
“One area I am concerned about is whether the government has the will power to keep up with the clampdown on expenditures,” the economist added.
