Greece FM says country will meet deficit targets
By ELENA BECATOROS (AP) – 18 hours ago
ATHENS, Greece — Greece is on track to meet its target of reducing the deficit this year, Finance Minister George Papaconstantinou said Wednesday, dismissing any talk of his country defaulting on its debt as "ridiculous."
Papaconstantinou said data being published in the next few days shows that Greece's deficit has fallen 40 percent in the first five months of 2010.
Greece's estimated budget gap stood at 13.6 percent of gross domestic product in 2009, and the government has pledged to reduce it to 8.1 percent by the end of 2010.
"We are on target," Papaconstantinou told reporters, adding the reduction was achieved by increasing revenue by over 8 percent and cutting government spending by more than 10 percent.
"So on the budget, the news is good," he said, but stressed that "there is no complacency" and the government was still working to pull Greece out of its financial crisis.
Greece's government debt woes have sparked a continentwide debt crisis and caused the euro to sink. It also forced the International Monetary Fund and the other 15 nations that use the common euro currency to offer Greece a euro110 billion ($131 billion) package of rescue loans to prevent the country from defaulting.
Still, many economists believe Greece will eventually restructure its debt despite the bailouts.
Papaconstantinou said Athens expects to receive a second installment of loans in September, which allows Greece to avoid the bond markets that have demanded high premiums to loan the country money.
"Greece, apart from the treasury bills, has no reason to go to the markets for a very long period of time. That is the luxury of the 110 billion," the minister said.
Earlier this month, Papaconstantinou said Greece, which has about euro4 billion in short-term debt issues expiring next month, would issue new treasury bills in July.
Papaconstantinou reiterated that any talk of Greece defaulting "is a ridiculous story" and was completely unfounded.
He also said a new chief of Greece's statistics agency will be named by the end of the month. The previous head quit shortly after Prime Minister George Papandreou's Socialists took over from the conservative government in October and the new government revealed that budget data had been falsified. Greece had to sharply raise its budget deficit estimate, from 3.7 percent of gross domestic product in early 2009 to 13.6 percent.
The result was a massive credibility deficit in Greek figures.
Greece has been in recession for more a year. First quarter figures released by the statistical service Wednesday showed output continued to shrink in the January-March period, dropping 1 percent compared to the previous quarter.
On the year, the contraction was 2.5 percent of gross domestic product.
Public consumption fell 9 percent on the year, while private consumption rose 1.5 percent. The statistical service also said wages fell 1.2 percent from a year earlier.
"Surprisingly, private consumption rose for the third quarter in a row," IHS Global Insight senior economist Diego Iscaro wrote in an analysis note. "(But) the outlook for the coming quarters is gloomy."
He wrote that private consumption, which accounts for more than 70 percent of Greece's GDP, "is expected to be in the doldrums as a result of a deteriorating labor market, a reduced availability of credit for consumption, accelerating inflation, higher taxes, and lower public spending."
But he also noted that exports are likely to benefit from a weakened euro, which reached a four-year low this week.
Associated Press writer Nicholas Paphitis in Athens contributed to this report.
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