Tags: Greece | Spending | Cuts | Budget | Targets

Greece Unveils More Spending Cuts to Meet Budget Targets

Thursday, 18 Nov 2010 07:53 AM

Greece's government unveiled more spending cuts Thursday in the 2011 budget it submitted to Parliament, pledging to reduce the deficit to 7.4 percent of gross domestic product from this year's projected 9.4 percent — a cut of 5 billion euros ($6.82 billion).

The budget, presented by Finance Minister George Papaconstantinou, includes cuts in operational and wage costs at loss-making state-run enterprises, health care and defense. The government will also increase the lower bracket of consumer tax from 11 percent to 13 percent — although VAT in the vital tourist industry will be cut to 6.5 percent from 11 percent.

The deficit reduction for next year "is based on concrete measures cutting expenditures and increasing revenues totaling 14 billion euros," the Finance Ministry said.

According to the budget, the recession in Greece will be sharper than originally forecast. The economy is expected to contract by 3 percent next year compared to the originally forecast 2.6 percent. This year, the economy is to shrink by 4.2 percent.

Greece's economy is under strict supervision after the country began receiving funds from a three-year, 110 billion euros ($150 billion) package of rescue loans from the International Monetary Fund and the other 15 countries that use the euro as their currency. Without the loans, Greece would have defaulted on its debt.

In return, the government has imposed a series of strict austerity measures, including cutting public sector salaries and increasing taxes.

On Monday, Athens increased its projected deficit for this year to 9.4 percent of GDP from the previous target of 8.1 percent, after the European Union's statistics agency, Eurostat, revised last year's deficit figure to 15.4 percent — which translates into 36.15 billion euros.

Describing 2010 as "one of the most crucial and important years in the history of our country," the Finance Ministry noted the government had achieved a 6 percentage point cut in the deficit this year.

"The starting point for this adjustment was very bad. The 2009 deficit shows the extent of the fiscal derailment of the country," the ministry said in a written statement.

Eurostat's revision makes it more difficult to meet next year's target, which the EU said earlier this week was for a deficit of 17 billion euros for next year — a roughly 5 billion euro reduction from this year's expected deficit. Although Greece has been generally on track with its austerity measures, it has been missing its revenue targets.

"We welcome the strong commitment of the Greek government to undertake the required additional measures in the budget for 2011," the Eurogroup, which represents the 16 euro nations, said in a statement in Brussels Tuesday.

Prime Minister George Papandreou had pledged not to introduce any measures that would cause more hardship for the average Greek, such as new taxes.

"We cannot forget that we were on the verge of bankruptcy," government spokesman Giorgos Petalotis said on private Antenna television Thursday morning, before the budget was made public.

"We have been through a difficult time, and we will have a difficult time," he said. "But we have better prospects for the future."

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Greece's government unveiled more spending cuts Thursday in the 2011 budget it submitted to Parliament, pledging to reduce the deficit to 7.4 percent of gross domestic product from this year's projected 9.4 percent a cut of 5 billion euros ($6.82 billion). The budget,...
Greece,Spending,Cuts,Budget,Targets
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2010-53-18
Thursday, 18 Nov 2010 07:53 AM
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