The Greek rescue package that the EU provided last year required massive cuts, which led many economists to doubt whether the package would actually cure the patient or induce a coma. Coma it is. This years budget shows the effects of the large austerity measures (afterall G is part of Y!), so the fall in Greek national income depressed goverment revenues to jack up the deficit. The ill designed package from a year ago, now leaves Europe where exactly in the same spot it was in last year: negotiating either a Greek exit, or more cash infusions to keep the patient alive. The BBC has the story
Greece budget deficit worse than thought
and far above the 8% target agreed by Athens as part of the country's
financial rescue. The data comes as Eurostat unveils official debt statistics for the EU. In Greece, debt levels jumped to 142.8% of the country's gross domestic product from 127.1% previously.
Select counties' debt statistics
Country |
Deficit |
Debt |
|---|---|---|
|
Rep of Ireland |
32.4% |
96% |
|
Greece |
10.5% |
143% |
|
UK |
10.4% |
80% |
|
Spain |
9.2% |
60% |
|
Portugal |
9.1% |
93% |
|
France |
7.0% |
82% |
|
Italy |
4.6% |
119% |
|
Germany |
3.3% |
83% |
|
Estonia |
surplus: 0.1% |
7% |
|
Eurozone |
6.0% |
85% |
|
EU |
6.4% |
80% |
Data for 2010. Source: Eurostat
The Greek government has brought
in a string of draconian spending cuts and tax rises demanded by
European peers and the International Monetary Fund as part of its
bail-out last year. The measures succeeded in bringing the government's deficit
down from 15.4% of GDP in 2009, but still fell well short of what was
hoped. Greece's two-year cost of borrowing rose further in bond markets to more than 23% per annum following the data release. The level indicates that markets believe the country's debts
are unmanageable and Athens is very likely to impose losses on
bondholders when its existing bail-out loans expire in 2013. The Greek government blamed the excess borrowing on the country's recession, which has proved deeper than expected. "The Greek government remains committed to achieving its deficit targets," said the finance ministry in a statement. "All necessary measures in that direction are accounted for
in the context of the medium-term fiscal strategy which will be
submitted to parliament by 15 May." Many economists point to the vicious circle Greece is caught
in, whereby government austerity is worsening the recession, which in
turn is increasing the government deficit.
Meanwhile, Eurostat data also painted a bleak picture at the
Irish Republic, whose 2010 deficit was confirmed at an unprecedented
32.4% of GDP. The level of new borrowing – double what was recorded the year before – was largely due losses at the nationalised Irish banks. Like Greece, Portugal – which is set to become the third
eurozone member to receive a bail-out – also overshot its 7.3% target,
with a 2010 deficit of 9.1%. Also like Greece, both Portugal and the Irish Republic saw
their borrowing costs increase after deficit data was announced, each
seeing yields on five-year bonds increase to about 11.5%. However, there was good news for Spain, which many see as next in line to become stuck in the eurozone debt quagmire. Madrid succeeded in cutting its deficit to 9.2% of GDP, beating the 9.3% target it had set itself.