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Greece claims deficit cut by 40% in first half of year July 5, 2010

Posted by Yilan in EU, European Union, Yunanistan.
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Greek Finance Minister George Papaconstantinou Greek Finance Minister George Papaconstantinou says he aims to protect public servicesGreece’s finance minister, George Papaconstantinou, has said the country cut its deficit by 42% this year.

He hoped Greece would be able to borrow from financial markets again by 2011.

It means the country is beating a target set by the IMF and EU under the terms of a 110bn-euro (£73bn, $88bn) emergency loan extended this year.

According to Greek central bank data, the government’s deficit was 11.5bn euros in the first half of the year, down from 19bn euros a year earlier.

The deficit for the first six months stood at 4.9% of GDP, well inside the IMF target of 5.8%.

The Greek government has vowed to cut the full-year deficit to 8.1% of GDP, from 13.6% last year.

The turnaround in the primary deficit – which ignores debt service costs and is the best measure of financial stability – was even more striking, falling 56%.

‘Overly pessimistic’Total government spending was cut 15% to 30.1bn euros, while revenues rose a moderate 7% to 23.2bn euros.

The public spending cuts have met with vitriolic opposition from trades unions.

The country has suffered a series of general strikes in recent months, with a sixth strike scheduled for this Thursday, to coincide with a parliamentary vote that will raise the retirement age to 65.

Tax income was weighed down by the continuing Greek recession, and fell “slightly behind” target, according to the finance minister.

However, Mr Papaconstantinou described the official government forecast of a 4% contraction in Greek GDP this year as “overly pessimistic”, and thought the number would be nearer 3%.

Default riskGreece has been effectively cut off from the bond markets in recent months amid fears the country will default on its debts.

The cost of insuring against a Greek default via credit default swaps – a measure of the country’s credit worthiness – remains at an exceptionally high 12% per annum.

However, Mr Papaconstantinou said the government would seek to borrow from markets as soon as next year.

This is despite the fact that the loan package Greece won from the IMF and EU should meet its borrowing needs until 2012.

Greece expects to draw down the next 9bn euros of the emergency loans by September, and a further 9bn euros by the end of the year.

Greece’s access to this money depends on whether the IMF and EU are satisfied with Greece’s progress in tackling the deficit.

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