Greece's debt spiraling out of control - report

Athens - Greece's finance minister found himself on the defensive Thursday after an independent watchdog released an internal report warning that his country's debt was out of control and is likely to miss its budget targets in 2011 just as officials held crucial talks with international creditors.
The newly created committee, known as the State Budget Office and which is independent of the government, warned that the country's primary deficit is increasing and has already exceeded the annual target in the first seven months of the year.
'It must be noted that the primary deficit for the first seven months of the year is significantly higher than the figure projected for the entire year, 1.7 per cent of GDP,' the report published in the Greek daily Kathimerini newspaper said.
The report warned that even if the Greek government fully implements austerity measures in 2011 it still would 'not fully offset the slippage in budget targets.'
The warning came as top-ranking officials from the European Union and International Monetary Fund (IMF) are currently in Athens to review the debt-ridden country's austerity programme before deciding whether to release a new batch of rescue loans totaling 8 billion euros next month.
'All responsible international organizations know in which way macroeconomic and fiscal reports are compiled, checked and published,' Finance Minister Evangelos Venizelos said in a statement.
'It is still clear that the budget office still lacks this knowledge, experience and responsibility,' the minister said.
Greece is in the midst of a major financial crisis and has avoided bankruptcy only after receiving two successive international bailouts worth a total of 220 billion euros.
The latest loan was sealed on July 21 just as the news that the economy is expected to shrink by more than 4.5 per cent in 2011, while the budget deficit is seen narrowing to 7.6 per cent of GDP from 10.5 per cent last year.
The Socialist government has agreed to a wave of austerity measures, which include tax increases and salary cuts, in exchange for the emergency funding.
'It is clear that the country's problem is not just the size of the public debt but the inability to consolidate the current fiscal management. Despite gigantic effort for fiscal adjustment, no primary surplus has been achieved. On the contrary, the primary deficit is widening,' the committee said.
The committee urged increased efforts to fight tax evasion and reduce the primary deficit in light of an even worse than expected recession.
'The widening of the deficit is associated with worrying fiscal developments, particularly delays in implementing the adjustment programme, and the limited efficiency of revenue collection mechanisms,' the report said.
Greece has committed to cutting its massive budget deficit from 15.4 per cent of GDP to below the EU limit of 3 per cent in 2014, and achieving a primary surplus next year.
Venizelos said he is currently discussing with visiting EU/IMF inspectors measures for stemming the recession, but insisted that Greece would not seek additional time from its creditors to reach its target.
News reports said EU/IMF officials are urging the Greek government to move faster on implementing an across-the-board wage structure for public sector employees and slashing public spending.
EU and IMF officials, who are meeting with officials from the finance and labor ministries, showed no willingness to renegotiate the deadlines to which the government has committed itself, reports said.
The inspectors, who are also to discuss other issues - including tax evasion - with the Greek finance minister, are to wrap up their meetings by September 5.