Tags: Greek | Debt | Economy

Greek Debt Set to Bulge Further as Economy Shrinks

Monday, 03 Oct 2011 01:58 PM

Greece's economy will continue to shrink by 2.5 percent next year, compared with a 5.5 percent contraction in 2011, according to the country's 2012 budget draft released on Monday.

Government debt is seen climbing to 172.7 percent of the country's gross domestic product (GDP), from an estimated 161.8 percent this year, the budget draft showed.

The jobless rate is expected to rise to 15.2 percent in 2011 and to 16.4 percent in 2012.

Deputy Finance Minister Pantelis Oikonomou said earlier on Monday that Greece had managed to convince its lenders that fiscal slippages were mainly due to a deeper-than-expected recession.

"To the extent that they were convinced that... the recession is indeed deeper, I think that we have figured things out," deputy finance minister Pantelis Oikonomou told television station Mega.

Asked whether the negotiations with the "troika" of EU/IMF inspectors have come to a successful conclusion, Oikonomou said: "I believe we have essentially concluded... we have covered all the main topics."

The troika will have two more meetings at the country's General Accounting Office to cross-check some figures and start writing its report on Wednesday, Oikonomou said.

However, sources close to the troika had said earlier that its visit was expected to last well into this week. The inspection does not just focus on 2011 budget figures, but also on budget plans for 2012-2014 and commitments to raise 50 billion euros ($66.20 billion) from privatizations by 2015.

European Union officials say the troika's assessment is not just about disbursement of the next bailout tranche, but that it could also determine whether Greece needs to demand more debt relief from private creditors, a measure that could effectively amount to default.

Greece said late on Sunday it would miss a deficit target for 2011 set just months ago in its bailout package, pledging to catch up much of the shortfall next year.

© 2015 Thomson/Reuters. All rights reserved.

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