Tags: Greece | Austerity | 2011 | Budget

Greece to Propose More Austerity in 2011 Budget

Monday, 04 Oct 2010 07:29 AM

The Greek government is expected to propose more austerity measures when it submits its budget for 2011 on Monday, in an attempt to further trim the deficit and meet targets set by an international bailout.

Finance Minister George Papaconstantinou has pledged not to impose any further salary cuts on civil servants in the budget. But more austerity is expected as the government attempts to cut its budget deficit to 7.6 percent of gross domestic product by the end of next year.

Greece's deficit stood at nearly 14 percent of GDP at the end of 2009, and the government says it is on track to meet its 2010 target of reducing the gap to 8.1 percent of GDP.

But while it is largely successful in cutting costs, the government is having more difficulty boosting revenue.

Official data show net revenue increased only 3.3 percent in the first eight months of the year, whereas the target for the full year is 13.7 percent. The slow rise in revenue was offset by a larger than expected drop in spending, which fell 12 percent from January to August, well beyond a year-end target of 5.8 percent.

Greece is receiving rescue loans from the International Monetary Fund and other eurozone countries under a three-year euro110 billion ($151 billion) package that prevented it from defaulting on its debts earlier this year.

In return, Prime Minister George Papandreou's government, which came to power a year ago after winning a landslide in elections, has imposed tough austerity measures including salary cuts for civil servants, trimmed pensions and increased consumer and income taxes. The measures have angered labor unions, which have carried out a series of strikes and demonstrations, most recently by truck drivers objecting to the liberalization of their profession.

"We are on a road of aggressive fiscal adjustment," Papaconstantinou said in an interview with Sunday's To Vima newspaper. "In just one year we have managed to carry out the greatest deficit reduction ever achieved by a eurozone country."

The finance minister said that after the first two years of austerity, "the following years will be a period of stability, development."

The crisis broke out late last year after Papandreou's newly elected government dramatically revised the deficit upwards, eventually to four times the eurozone limit of 3 percent of GDP. It blamed the previous Conservative administration for manipulating statistics to make Greece's finances appear in better shape than they were.

The revision led to a loss of confidence in the country's ability to pay back its debts, and sent its borrowing costs skyrocketing, essentially locking Greece out of the international bond market.

Papaconstantinou has said he hopes the country will be able to return to the bond market sometime in 2011.

On Saturday, Chinese Premier Wen Jiabao, who started a weeklong tour of European countries in Athens, vowed to buy Greek bonds when the country does return to international markets.

Wen also said China planned to double its annual trade volume with Greece to $8 billion (euro5.83 billion) by 2015 and said Beijing hoped to help other fragile economies in the EU.

© 2017 Thomson/Reuters. All rights reserved.

 
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The Greek government is expected to propose more austerity measures when it submits its budget for 2011 on Monday, in an attempt to further trim the deficit and meet targets set by an international bailout. Finance Minister George Papaconstantinou has pledged not to impose...
Greece,Austerity,2011,Budget
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2010-29-04
Monday, 04 Oct 2010 07:29 AM
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