Greek debt worse than estimated

Greece's 2009 budget deficit and debt levels were much higher than previously estimated, the European Union statistics agency said Monday, making it unlikely the country will reach targets set out in its bailout agreement.

Greece's 2009 budget deficit reached 15.4 per cent of gross domestic product, significantly above its previous estimate of a 13.6 per cent deficit, Eurostat said in a statement.

Public debt stood at 126.8 per cent of GDP at the end of last year, higher than that of any other EU state. In April, Eurostat had estimated the figure at 115.1 per cent of GDP.

The revisions are likely to mean Greece will not achieve its initial target of lowering the deficit to 8.1 per cent of GDP by the end of this year.

Prime Minister George Papandreou insisted last week that his government would still be able to reduce the deficit by at least 5.5 percentage points by the end of the year, as promised.

But in a weekend newspaper interview, he conceded the deficit revision would add pressure on his government to cut costs, and said Greece could seek an extension for repaying its rescue loans.

The upward revision of debt and deficit levels was widely expected since Eurostat said there were some issues with the Greek data when it released its previous estimates in April. The statistics agency said Monday that all the issues had been addressed and it no longer had any reservation over the Greek data.

The revised data came as Greece's finance minister was meeting with officials from the International Monetary Fund, the European Commission and the European Central Bank.

The three delegations, dubbed the "troika," were in Athens to review the debt-ridden country's finances, as part of regular checks of Greece's implementation of the three-year $110 billion euros loan agreement that rescued it from bankruptcy in May.

Greece has struggled to raise revenue, with figures showing it is lagging behind its targets, although it has generally performed better in spending cuts. The government imposed stringent austerity measures, including cutting civil servants' salaries, hiking taxes and freezing pensions, earlier this year.

The government's austerity measures led to a backlash from labour unions, which have organized a series of strikes and protests, some of which have turned violent. Greece's Communist Party planned a protest against the rescue loan program on Monday evening.

Without the bailout loans, Greece would have already defaulted on its debts. It is effectively locked out of the international bond market by the massively high interest rates it would have to pay if it were to issue bonds — a reflection of low trust in the country's prospects.

Local elections held Sunday gave Prime Minister George Papandreou a welcome boost amid recession and rising unemployment. His governing Socialist party won mayoral races in Athens and Greece's second largest city of Thessaloniki for the first time in 24 years, while its candidates won eight of 13 regional governor races.

However, voter turnout hit record lows, with just 34 per cent in Athens and 47 per cent nationally — figures that opposition parties argued revealed popular discontent with the government. Voting is mandatory in Greece, although in practice penalties are no longer imposed on those who do not cast ballots.