Greece has been under the EU Monetary Affairs Commission’s Excessive Deficit Procedure since April, along with the U.K., France, Spain and Ireland. Greece alone failed to receive a deadline extension today to cut its deficit.
As the commission evaluates Greece’s new socialist government’s budge and mid-term economic plan, the country is likely to get a final deadline to cut its budge gap.
EU Monetary Affairs Commissioner Joaquin Almunia, who called Greece’s financial issues “a concern for the whole euro area”, had this to say at a new conference in Brussels: “Greece needs very crucial institutional reforms.” During the same conference, where he presented deficit reports by the European Commission, he said that Greece had taken “no effective action” to cut its shortfall, set to be 12.7 percent of gross domestic product this year. The EU deficit limit is 3 percent.
The budget gap in Greece is mostly the result of “an insufficient response” by Greek authorities, in addition to expenditure overruns. The first investigation into Greece’s deficit was opened in 2004 by the EU after revised data revealed that the deficit had annually exceeded the EU ceiling since the country’s adoption of the euro. Hosting the Olympic Games in Athens resulted in the euro-area record of a 7.5 percent deficit.
“A country with a deficit of 12.5 percent and with the momentum which our debt has, creates a wider issue for the entire euro zone,” said Greece’s Finance Minister George Papaconstantinou said in Athens today. “We don’t agree with the commission’s estimate for next year because these imply no change in economic policy. We however will change economic policy.”
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