Quelle Surprise! Greece will miss its deficit targets:
The budget deficit will reach 8.5 percent of GDP this year, missing a 7.6 percent target. It will be brought down to 6.8 percent of GDP next year but will still miss the bailout target of 6.5 percent of GDP.
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,” the finance ministry said in a statement.
In the same documents, the country sees its economy contracting by 5.5 percent this year and about two percent next year. This is in line with the IMF’s World Economic Outlook, published last month, but much worse than the projections used for the July bailout negotiations, which predicted the country’s economy would return to growth in 2012.
I suggest you ignore all of those numbers, whatever the predictions are they will be wrong. Here is what the Greek PM was saying back in May 2010:
Greece will not restructure its debt and will not need more cuts to achieve fiscal targets set in the emergency funding programme it agreed with the European Union and the IMF, its finance minister told a Sunday paper.
It has now done both of those things with more to come:
The Greek cabinet is meeting today to finalise a plan to axe 30,000 of civil service jobs by the end of the year.
The meeting follows three days of talks with Greece’s creditors – the European Commission, the European Central Bank and the International Monetary Fund about a government proposal that the civil service cuts will come mainly from placing staff nearing retirement age on ‘reserve,’ or suspending them at reduced pay.
That probably isn’t going to be enough to satisfy the Troika:
After a meeting with Greek officials on Saturday international auditors revealed that they were “disappointed” with talks over planned civil service job cuts. Media reports claim negotiators were at odds over the legal implications of mass redundancies.
Officials from the European Commission, the European Central Bank and the International Monetary Fund – known as the “troika” – are in Athens to decide on whether Greece should receive the next instalment of a multibillion euro bailout.
The troika must agree that the Greek government has fulfilled its promise to impose further austerity measures in order for it to receive the vital eight-billion-euro ($10.7-billion) bailout and avert a debt default.
Among a series of cut-backs, Greece has pledged to place 30,000 public sector employees on “reserve” by the end of this year. This effectively means that they would be suspended without pay.
But according to Greece’s Ta Nea daily newspaper troika officials were concerned that the laid off workers could go to court and win their jobs back.
It should now be obvious to everyone that no matter what happens Greece isn’t going to pay back its debts. The original article explains why:
A deeper-than-expected recession makes it harder for Greece to collect revenues and meet its deficit targets. It also makes the impact of austerity measures such as tax hikes and wage cuts weigh harder on people.
There is nothing unexpected about this recession, this is exactly what you would expect to see when a non-exporting, currency-bound nation with large private and public sector deficits attempts to deleverage the public sector. I talked about this here. Once again Greece will need more money, bring on the European self-hate:
German Finance Minister Wolfgang Schaeuble ruled out a larger German contribution to the European Financial Stability Facility in an interview published Saturday, according to Sky News.
“The European Financial Stability Facility has a ceiling of 440 billion euros, 211 billion of which is down to Germany. And that is it. Finished,'” he told magazine Super-Illu.
With Trichet with one foot out the door it looks like it is going to be yet another rough week for European markets.