An Acropolis guard talks on his mobile phone while sitting alone in the ancient temple of Athena Nike in AthensJOHN KOLESIDIS/Reuters
Just over a year ago, Greece's socialist PASOK party surged to power, stunning world markets with the revelation that the country's budgetary deficit was 12.7 per cent - more than triple the estimate of the ousted conservatives and quadruple the rate allowed under Europe's single currency rules.
Months later, the deficit figure was revised to 13.6 per cent of GDP in 2009. Now, Greek officials reckon it is about 1.5 percentage points higher, sparking the wrath of the European Commission, which sent a dozen experts to Athens to probe the faulty statistics provided by the Greek government.
For many financial experts in the West, the budget deficit rewrite isn't a surprise; private financial forecasts had set the figure well above 15 per cent from the start of the year. Still, Greece's latest public admission casts further doubt on the credibility of the country's economic taskmasters and state bookkeeping techniques.
The revision has already skittish investors fretting about whether Athens - struggling to fix its broken economy with the help of a $146-billion (U.S.) bailout loan from the International Monetary Fund and the European Union - will be able to pay off its debts, or whether it will eventually collapse beneath the weight.
"It's obvious that this is a massive new complication for the Greeks," said Alec Mally, executive director of the Athens-based Global Economic Affairs strategy group.
"Knowing the extent of the illness is imperative for the treatment and dosage of medicine it needs to be cured," he said. "Greece's stabilization programs have to be extended."
Although EU auditors and statistics officials are expected to release both deficit and debt tallies soon, it remains unclear what the exact impact of the latest deficit revision will be. Government officials predict a small adjustment. But financial experts argue that a budget deficit discrepancy of 1.4 percentage points would require Greece to rake in as much as an additional $5-billion by year's end to meet strict targets set by its euro zone peers and the IMF in exchange for the bailout (which set the deficit target at 8.6 per cent).
Since taking power, the PASOK (the Panhellenic Socialist Movement) government has struggled to fix the economy, implementing draconian cutbacks and shaving more than $12-billion in federal expenditures this year alone. It has also overhauled the pension system, liberalized rigid labour laws, and faced down potent public discontent in a bid to yank the country out of its worst recession in 16 years.
Greek government officials say the budget deficit will narrow to 7.8 per cent of GDP this year, a feat IMF managing director Dominique Strauss-Khan called "amazing."
The path to recovery remains difficult however, and the threat of default lingers. Ten months into the year, net revenues are growing at a rate of only 3.7 per cent, compared with a revised target of 8.7 per cent, according to the National Bank of Greece, leaving state coffers cash-starved, the recession swelling and government officials aggressively wooing foreign money to boost development.
With its high debt-to-GDP ratio - Greece's borrowing needs are expected to soar to $99-billion in 2014 - investors question the country's ability to rid itself of the mountain of debt, which imperils the financial health of much of Europe.
"With slim growth prospects, the task looks very difficult," said a senior analyst at the National Bank, who asked not to be identified because of his position. "The key driving force to success will be determined by the ... adaptability of the business sector, and whether growth can reach a nominal rate of 3.5 per cent [by 2013]"
That's diplomatic longhand for the need for foreign investments. In recent months, as Western investors remain worried about Greece's future, senior government officials have been wooing the Chinese and sovereign wealth funds, such as the $60-billion Qatar Investment Authority, winning commitments to develop Greece's two money-making industries: tourism and shipping.
Meanwhile, the government has begun considering the prospect of stretching its three-year bailout payment schedule to give the treasury more breathing room as it moves to rein in the country's runaway finances and avoid a restructuring of its debt.
"We haven't officially requested an extension," said Finance Minister George Papaconstantinou. "But the matter is being discussed [with the IMF]"
Special to The Globe and Mail
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GREEK SALARY BINGE
Workers at Greek public utilities received more than double the average pay of private sector workers in 2009, the Finance Ministry said Wednesday - revealing the extent of a salary spending binge likely to push the country's budget deficit even higher.
$57,000
Average salary, in U.S. dollars, for workers at utilities and other state-run companies - four times the minimum-wage level.
$79,000
Average salary at urban rail company, ISAP, one of the 11 worst money-losing state companies.
$2.4-billion
Combined loss in 2009 of the 11 companies, including one that organizes horse races.
Associated Press