Greece to miss deficit target

Failure to hit target puts next loan instalment at risk.

Greece will miss a target for reducing its deficit this year, the government announced last night (2 October).

The Greek government was aiming to cut its deficit to 7.6% of gross domestic product this year. But according to figures released last night, the deficit will hit 8.5%, partly because of a drop in growth caused by austerity measures. The economy is expected to shrink by 5.5% this year.

The revised deficit figures have cast new doubts over whether Greece will qualify for the next instalment of an international loan package from the International Monetary Fund and the EU. Greece needs the €8 billion instalment to pay wages and pensions in October.

Officials from the IMF, the European Commission and the European Central Bank are in Athens to assess whether the government has done enough to qualify for the next loan payment.

Yesterday, the government announced it was reducing the wages of 30,000 servants in order to cut public spending.

According to media reports, officials were expected to recommend that Greece should receive the next loan payment because its performance in reducing the deficit had been affected by the larger than anticipated drop in growth.

Finance ministers from the eurozone and the EU will discuss the situation in Greece at meetings in Luxembourg today and tomorrow.