- Economic crisis - Europe - Greece
Eurostat says Greek debt is worse than previously thought
According to Eurostat's estimate, Greece public deficit was 13.6% of GDP in 2009. Despite the worrying figures, Finance Minister Georges Papaconstantinou (pictured), insists that his country would not default on its debt.
REUTERS - Greece plunged ever deeper into turmoil on Thursday when new data showed a sharp widening of its 2009 deficit within a dismal set of figures for almost all European governments.
Brussels also warned the Greek government that fresh doubts over its latest public finance figures mean the news is likely to get worse again, further raising the temperature on money markets already bleeding Greece dry.
The double whammy dramatically increased pressure on the Greek government as it negotiates with its euro currency partners and the International Monetary Fund on the conditions behind some 45 billion euros of emergency loans.
Figures from across Europe also underscored growing concern that deficit contagion from Greece, Spain, Portugal and other heavily-indebted countries could seriously weaken or ultimately break the 16-nation eurozone at the seams.
"Markets have become more nervous about the negotiations... and the potential for contagion if these negotiations fall through," said Barclays Capital analyst Yuki Sakasai.
Greece's public deficit for 2009 shot up to 13.6 percent of gross domestic product, with yet another half percentage point rise likely, the EU's data agency said.
That marked a sharp increase from the most recent upwards revision to 12.9 percent of output.
The interest rate demanded to lend money to Greece jumped above 8.5 percent following the release of figures that radically change the baseline for calculations of massive budget cutbacks and reforms imposed on Athens by the EU.
"Eurostat is expressing a reservation on the quality of the data reported by Greece, due to uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps," the EU said.
That last reference concerned complex fundraising activities undertaken by the controversial US bank Goldman Sachs.
It said its investigation "could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP for the deficit and five to seven percentage points of GDP for the debt."
EU economic and monetary affairs commissioner Olli Rehn said "the plate needs to be cleaned up from the burden of the past."
Greek debt was pegged at 115.1 percent of output, at 273.4 billion euros, an improvement on the most recent estimate, although once again an upwards revision of as much as five-to-seven percentage points is envisaged depending on the results of the probe.
As Greek civil servants staged a fourth 24-hour strike this year, the finance ministry in Athens said the new data "does not change the target for reducing the deficit in 2010 by at least 4.0 percentage points of output."
The global crisis has laid bare the fragile state of government finances in swathes of once-safe Europe, prompting austere spending cuts and questions about the future of the euro itself.
Indeed, the combined deficit for the 16 euro countries more than trebled in 2009 to 6.3 percent of ouput, from 2.0 percent in 2008, hitting more than twice the level permitted under the bloc's budgetary rules.
Ireland was the worst offender, at 14.1 percent, followed by Greece, Spain on 11.1 percent and Portugal with 9.4 percent. France's deficit also shot up from 3.3 percent in 2008 to 7.5 percent last year.
Outside the eurozone, Britain's deficit hit 11.5 percent and industrial powerhouse Poland's topped 7.1 percent.
None of the 27 European Union member states recorded a government surplus in 2009, with only Estonia and Malta actually improving budgetary performance year-on-year.
The state of the so-called PIIGS -- Portugal, Italy, Ireland, Greece and Spain -- has left jittery investors to worry about previously unthinkable government defaults.
"Capital is flowing to Asia (excluding Japan) and Latin America, attracted by strong growth prospects, appreciating currencies, and rising asset prices, and pushed by low interest rates in major advanced economies, as risk appetite continues to recover," the IMF said on Wednesday in a report on the state of the global economy.