Greece recorded the biggest budget deficit among European Union nations in 2009, pushing Ireland to the second place, latest data from Eurostat showed Monday. As expected, revised figures showed Athens running a higher deficit than initially thought.
According to official data, the Hellenic Republic had a budget shortfall of 15.4% of gross domestic product, or GDP, last year. This was revised from 13.6% estimated in April. In absolute terms, the deficit amounted to EUR 36.150 million, up from EUR 22.36 million a year ago.
The European Union statistical agency said on October 22 that no member of the European Union recorded a government surplus in 2009. According to that report, which excluded Greece, Ireland registered the biggest shortfall in the region, with its deficit at 14.4% of GDP.
The higher than estimated deficit figure came as Greece struggles to meet its deficit target for this year and next. In May, the country had agreed to reduce its budget deficit to below the European Union-allowed limit of 3% of GDP by 2014 in exchange of an EUR 110 billion bailout package from the International Monetary Fund and the European Union. Still, the economy remained stuck in recession, contracting 1.1% between July and September.
European Union rules permit member states to hold a maximum public spending deficit of 3% of gross domestic product, while the maximum gross debt level is set at 60%. Today's Eurostat data showed that Greece had a government debt of 126.8% of GDP in 2009, up from 110.3% recorded in 2008.
Under the EU-IMF loan rules, Athens agreed to cut the budget shortfall to 8.1% of GDP by the end of this year. Today, the Greek Finance Ministry pledged to continue its fiscal consolidation effort in line with its three-year economic programme. The ministry also said it aims more deficit reduction this year than planned, with the debt estimated at 144% of GDP.
"Despite the data revision, the deficit reduction in 2010 is larger than initially targeted; 6 percentage points of GDP against a targeted reduction of 5.5 percentage points," the finance ministry said in a statement.
"The 2010 deficit resulting from the new revised figures and general government accounts after the reclassification is estimated to be 9.4% of GDP, a reduction in excess of EUR 14 billion compared to 2009."
The Eurostat data also showed today that the whole Eurozone budget deficit was 6.3% of GDP in 2009, a sharp increase from 2% of GDP in 2008 and staying well above the EU limit. The currency bloc had a debt of 79.2% of GDP.
Furthermore, the statistical agency said the deficit in EU27 accounted for 6.8% of GDP in 2009 compared with a shortfall of 2.3% of GDP in 2008. During the same period, government debt climbed to 74% of GDP from 61.8% of GDP.
In October, finance ministers from the European Union reached an agreement on quasi-automatic sanctions on member states that break budget and debt rules in the future. The plan would impose fines and other sanctions on countries that run up big spending deficits or rack up significant debt. It also includes punishments for countries that foster economic imbalances such as asset bubbles, which could potentially pose a threat to the euro.
Under the new rule, member states will be given six months time to bring their deficit and debts back under European limits before sanctions are imposed.
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