Despite a massive bailout package and fierce austerity drives, Greece is set to fall short of a deficit target that was drafted months ago, according to drafts of government budget figures released on Sunday.
This marks the fear that has been gripping the euro zone, and is heightened by the German vote to strengthen the euro zone’s bailout fund: perhaps drastic, expensive measures to avoid bankruptcy are not enough.
The unfortunate forecasts were made when inspectors from the International Monetary Fund (IMF), EU, and European Central Bank – called the troika – were in Athens to look over the books and decide whether approving a loan tranche was a good idea.
Without this, Greece would run out of money as early as this month.
The draft budget predicts a deficit of 8.5% gross domestic product (GDP) for 2011, which is short of the 7.6% target set.
“Three critical months remain to finish 2011, and the final estimate of 8.5 percent of GDP deficit can be achieved if the state mechanism and citizens respond accordingly,” said the Finance Ministry in a statement.
EU officials are under more pressure than ever with this news, as a Greek default would not only hurt European banks and the European single currency, but may well throw the world back into a global financial crisis.
Greece to need 2bn euros more
In the draft budgets released on Sunday, GDP is expected to fall by 5.5%, while government sources say it is expected to fall 2.5%.
While these numbers match up with recent predictions from the IMF, they are considerably worse than the predictions used to approve the 109 billion euro bailout in July. Those figures had a modest growth in Greece of 0.6%.
Missing the 2011 deficit target means Greece would need next to 2 billion extra euros to pay for its expenses this year.
It also means that the new tax hikes and wage cuts have not been enough to put Greece back on the right course.
“The vicious circle continues for the government,” said Yannis Varoufakis, a professor of economics at Athens University.
“We have disappointing revenues, missed targets and this will bring new measures and new austerity.”