Financially-stricken Greece had an even bigger budget deficit for 2009 than previously thought, official figures showed Thursday — at a time the country is considering whether to tap a bailout facility from its 15 partners in the eurozone and the International Monetary Fund.
The European Union's statistics office Eurostat said that Greece's budget deficit in 2009, as a percentage of economic output, was 13.6 percent. That's up from the previous estimate of 12.9 percent and nearly double the 7.7 percent recorded in 2008.
Greece's total government debt as a proportion of GDP stands at a massive 115.1 percent, a burden so large that some analysts think it will have trouble paying it over coming years even if a bailout saves Athens from default this year.
Eurostat also warned that the Greek figures may actually be even worse, citing "uncertainties" over the figures related to social security funds and the recording of complex financial swap arrangements.
"Following completion of the investigations that Eurostat is undertaking on these issues in cooperation with the Greek statistical authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt," Eurostat said.
Greece began talks Wednesday with the IMF, the European Central Bank and the European Commission on details of a rescue package to deal with its debt crisis. The talks are expected to last at least ten days and are set to focus on the terms and conditions of the joint eurozone-IMF bailout plan agreed in Brussels earlier this month so the package can be activated quickly if Greece requests the aid.
Eurozone countries have pledged euro30 billion ($40.5 billion) in loans for this year but have not spelled out any longer-term commitments.
The EU's Monetary Affairs Commissioner Ollie Rehn said in Washington D.C. ahead of this weekend's IMF meeting that the figures made it even more necessary that the Greek government fulfills its side of the bargain — delivering its promise to reduce the budget deficit by four percentage points this year alone.
Rehn also said they underline "the urgency to intensify the preparations of structural reforms and additional measures for the coming years."
"The Commission is currently working with the ECB and IMF in Athens to this effect, in order to have the joint program ready for swift activation, when needed," Rehn added.
The Greek government has said it would prefer to continue borrowing on the international market, but its borrowing costs have skyrocketed amid mounting fears of a Greek debt default even if the bailout package is activated. The spread between Greek and German ten-year bond yields remains excessive at over 5 percentage points.
"Greek and euro authorities have been playing down the risk of a Greek default for months," said Jane Foley, research director at Forex.com.
"The market, however, no longer has blind faith in the coherence of economic and monetary union and in the rhetoric that is being offered," Foley said. "Irrespective of the spin stemming from the EU, debt restructuring and default are still possible in Greece going forward."
The Eurostat figures also showed the difficult state of government finances across the EU.
Ireland, which has enacted tough spending cuts, had the highest deficit across the 27-nation EU at 14.3 percent of gross domestic product. Because of the budgetary constraints announced, Ireland has been rewarded with far lower market borrowing costs — the yield on its 10-year bonds stands at 4.7 percent, about four percentage points lower than Greece's.
The lowest was recorded in Sweden, where the budget deficit was only worth 0.5 percent of the country's GDP.
In total, the eurozone government deficit to GDP ratio increased from 2 percent in 2008 to 6.3 percent in 2009. For the 27-nation EU, the deficit swelled from 2.3 percent to 6.8 percent.
Regarding the overall debt burden, the ratio for the eurozone increased from 69.4 percent at the end of 2008 to 78.7 percent at the end of 2009, and in the EU27 from 61.6 percent to 73.6 percent.
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