Athens: Greece’s budget deficit continued to widen in November as an austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed on Tuesday.
The budget gap of the central government widened 5.1% year-on-year to €20.52 billion ($27.1 billion), according to finance ministry figures for January-November. This means that Greece will likely miss its 2011 deficit targets and may need additional austerity measures to catch up with its budget goals next year.
Debt-laden Greece has been consistently missing the deficit targets set by its international lenders under a bailout plan agreed last year, partly due to a deeper-than-expected recession but also because of its own failure to quickly implement reforms and crack down on tax evasion.
Euro notes on display. Photo: Reuters
The economy is seen shrinking by 5.5% in 2011, its fourth consecutive year of recession. Under the 2012 budget plan approved last week the budget deficit is expected to narrow to 9% of gross domestic product (GDP) this year from 10.6% in 2010, a target the finance ministry said was still feasible.
This year’s budget goals largely hinge on a string of emergency taxes imposed in September after Greece’s lenders threatened to withhold bailout funds if it did not meet its budget goals, a move that would have effectively rendered the country bankrupt.
“The current revenue shortfall is expected to be addressed in December, when the (emergency) tax measures will yield results,” the finance ministry said in the statement.
But a senior government official was less optimistic. “If current spending and revenue trends continue, the deficit will be at about 10% of gross domestic product (GDP) and not at about 9%,” the official, who declined to be named, told the news agency before Tuesday’s budget data were announced.
The new taxes included a charge of up to 5% on gross personal income as well as a controversial property tax which households must pay or face having their electricity cut off.
These measures have failed to visibly boost net tax receipts, which shrank by 3.1% year-on-year in Jan-Nov, a slightly slower pace than their 4.1% drop in the first 10 months of the year.
Recession is dealing a further blow to the budget as the government steps up grants to social security organizations, whose revenues are drying up. Spending before interest payments rose by 3.0% year-on-year in Jan-Nov, according to Tuesday’s figures.
The data refer to the state budget deficit, which excludes items such as local authorities. Even though they are not identical with it, they are indicative for the general government shortfall, the benchmark for the EU’s assessment of Greece’s economic policy programme.