Greece's budget Deficit Revised to Largest in EU

Greece had the euro region’s largest budget deficit and public debt last year after a revision by European Union authorities who said their concerns about the country’s economic statistics were now resolved.

Greece’s budget shortfall last year was revised to 15.4 per cent of gross domestic product from 13.6 per cent, surpassing Ireland’s 14.4 per cent shortfall, Eurostat, the EU’s Luxembourg-based statistics office, said in a report today. The debt was revised to 126.8 per cent of GDP, overtaking Italy at 116 per cent.

Revisions to Greece’s deficit figures, beginning after Prime Minister George Papandreou revealed last year that the gap was twice a previous forecast, spurred a surge in borrowing costs that pushed the country to the brink of default and triggered a region-wide debt crisis. Eurostat last revised the figure higher in April, sparking a downgrade of Greece’s credit standing by Moody’s Investors Service and forcing Papandreou the next day to formally seek a bailout from the European Union and International Monetary Fund to avoid default.

The yield premium investors demand to hold Greek 10-year bonds over similar-maturity bunds rose 6 basis points to 8.94 basis points. Yields on 10-year Greek bonds remain the highest in the euro region, at 11.5 per cent. That compares with 8.32 per cent for Ireland, 6.92 per cent for Portugal, 4.58 per cent for Spain and 4.18 per cent for Italy.

Future targets
The revisions mean that Greece won’t achieve the deficit targets it agreed to in return for the ¤110 billion ($150 billion) in EU-IMF emergency loans. Greece’s government has targeted spending cuts and revenue increases to bring the budget gap to 7 per cent of GDP in 2011 from 7.8 per cent this year.

The Greek Finance Ministry said today that after the revisions the budget deficit would be 9.4 per cent of GDP this year and debt will reach 144 per cent of GDP. The ministry today reiterated its pledged to bring the shortfall within the EU’s 3 per cent ceiling in 2014. The European Commission issued a report in January questioning the accuracy of Greece’s economic data.