EU reprimands Greece for out-of-control budget

Joaquin Almunia is concerned about Greece's "statistical discrepancies"Joaquin Almunia, the European Union's economic and monetary affairs commissioner told reporters at a meeting in Luxembourg that Greece's situation "can only partly be attributed to a worse-than- expected evolution of the economy. I am also seriously concerned about significant, new statistical discrepancies."

The issue also calls Greece's credibility into question, as the numbers released by the government in Athens are inconsistent with estimates from the EU's statistical office, Eurostat.

"The game is over," said Jean-Claude Juncker, head of the group of 16 nations that use the euro currency.

"We need serious statistics."

Greece's central bank on Tuesday urged the indebted country's new government to cut its swelling budget deficit by about 5 percentage points by the end of 2011 to avoid a sluggish recovery from the economic crisis.
"Countries like Greece, which suffer from twin (current account and fiscal) deficits and debt, are faced with a serious risk of a much more difficult and slow exit from crisis, with a protracted period of slow growth," the Bank of Greece said in an interim monetary policy report.
The country's general government debt swelled to 111.5 percent of gross domestic product (GDP) at the end of June from 99.2 percent at the end of 2008 and the budget deficit will be much higher than in 2008, when it stood at 5.6 percent of GDP, the Bank of Greece said.
"(We must put) the brakes on deficits, and accelerate structural reforms," the central bank said, urging the government to cut its structural budget deficit relative to GDP by a total 5 percentage points in 2010-2011.
The Bank of Greece expects the country's economy to shrink by close to or more than 1 percent in 2009, with unemployment expected to rise to more than 9 percent from 7.7 percent in 2008.
Falling GDP weakens banks' loan portfolios, with the ratio of non-performing loans rising to 6.8 percent at the end of June from 5 percent in December last year, the report said.
"Impairments continue to rise and constant vigilance is required," the Bank of Greece said, announcing a more interventionist approach in bank supervision.
The Bank of Greece expects the country's EU-harmonised inflation rate to fall to between 1.1 and 1.3 percent, from 4.2 percent in 2008.
The country's current account gap is seen narrowing to about 11 percent of GDP in 2009 from 12.7 percent last year.