Greek Problems Underestimated — Again

By:  Bruce Walker
10/03/2011
       
Greek Problems Underestimated — Again

The stock market in Europe took another hard hit when the Greek Finance Minister announced that his nation’s government will not meet its deficit reduction goals.

After the cabinet meeting, the Finance Minister said that the Greek national deficit would be $25.2 billion or 8.5 percent of the nation’s GDP, compared with the target goal of $22.8 billion or 7.6 percent of GDP. Even this projection was issued with caution. In an official statement the Finance Ministry said: "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."

In that cabinet meeting on Sunday, a draft budget for 2012 was approved. It was this meeting that produced the projected deficit of 8.5 percent. It issued more bad news: The Greek economy will shrink even faster than was previously stated. A 5.5 percent reduction in GDP is now projected for this year. The government tried to sound steady and sure. Minister George Papandreou told an extraordinary Cabinet meeting Sunday to approve a 2012 draft budget: "I want to repeat that we will be unswerving in our goal — to fulfill all that we have promised to ensure the credibility of our country.”We have a single and steady goal — to meet our commitments so that we guarantee our credibility." Papandreou’s budget called for reducing the pay, firing, or forcing into early retirement 30,000 government workers.

The stock market in Europe took another hard hit when the Greek Finance Minister announced that his nation’s government will not meet its deficit reduction goals.

After the cabinet meeting, the Finance Minister said that the Greek national deficit would be $25.2 billion or 8.5 percent of the nation’s GDP, compared with the target goal of $22.8 billion or 7.6 percent of GDP. Even this projection was issued with caution. In an official statement the Finance Ministry said: "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."

In that cabinet meeting on Sunday, a draft budget for 2012 was approved. It was this meeting that produced the projected deficit of 8.5 percent. It issued more bad news: The Greek economy will shrink even faster than was previously stated. A 5.5 percent reduction in GDP is now projected for this year. The government tried to sound steady and sure. Minister George Papandreou told an extraordinary Cabinet meeting Sunday to approve a 2012 draft budget: "I want to repeat that we will be unswerving in our goal — to fulfill all that we have promised to ensure the credibility of our country.”We have a single and steady goal — to meet our commitments so that we guarantee our credibility." Papandreou’s budget called for reducing the pay, firing, or forcing into early retirement 30,000 government workers.

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Photo: AP Images

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