Greece has revealed that the budget deficit for the country will be cut in both 2011 and 2012 but that the targets set by the EU and IMF will not be reached for either year. In 2011, the deficit will be 8.5% of GDP, down from the 10.5% seen in 2010, but not quite the 7.6% target.
Draft Budget Proposed
On Sunday, the government put together a draft of its budget for 2012. It blamed the prospective miss in targets on the recession. Markets were impacted by this news, with a 5% decline in Hong Kong and a decrease of 2.7% for Australia. Inspectors from the International Monetary Fund (IMF), European Union (EU), and European Central Bank (ECB) are deciding whether or not to give Greece some bailout funds it needs in order to meet costs and avoid bankruptcy. This amount is eight billion euros, or £6.9 billion.
A bankruptcy from Greece would mean potential damage to the world economy, with pressure on the eurozone and issues with the finances for the European Central bank.
Despite protests in objection to the austerity measures the government proposed, which are widely unpopular in the country, the finance ministry said that they would continue in order to make any difference at all. In a statement, the country’s finance ministry said, “Three critical months remain to finish 2011, and the final estimate of 8.5% of GDP deficit can be achieved if the state mechanism and citizens respond accordingly.”
For 2012, the projected GDP is 6.8%, closer but still short of the 6.5% target. Greece blamed a contraction of 5.5% instead of the estimated 3.8% for this failure and met to discuss the draft budget for 2012. The cabinet meeting approved a move to cut 30,000 jobs by putting them on “labour reserve” by the end of this year, which was approved unanimously. “Labour reserve” is more a wage decrease than a job cut, putting them on partial pay with a potential for dismissal.
The package to cut jobs, cut wages, and increase taxes have been a part of the unpopular austerity package in order to persuade the “Troika”, or EU, IMF, and ECB, to continue aiding the country with the bailout money. The three will meet to discuss Greece’s progress today in Luxembourg.