Greece beats deficit reduction targets

A protester holding a Greek flag looks at the Greek Parliament in Athens on Tuesday Nov. 6, 2012. Greece's unions are holding their third general strike in six weeks to press dissenters in the country's troubled coalition government not to back a major new austerity program that will doom Greeks to further hardship in a sixth year of recession. Two days of demonstrations are planned to start at 11:00 a.m. (0900GMT) Tuesday, continuing until lawmakers vote late Wednesday on the bill to slash euros13.5 billion ($17.3 billion) from budget spending over two years.(AP Photo/Nikolas Giakoumidis)
Nikolas Giakoumidis

ATHENS, Greece Greece is beating its budget targets by a wide margin so far this year, preliminary figures showed Monday, although the country is still deep in recession.

Deputy Finance Minister Christos Staikouras said the state budget was estimated to have had a primary surplus - which excludes interest payments on outstanding debt - of 2.6 billion ($3.5 billion) euros for the January-July period.

That is a far better result than its target of a 3.1 billion euro ($4.2 billion) deficit, and marks the first time the government has logged a significant primary surplus.

The actual deficit, including interest payments, came in at 1.9 billion euros, also better than the targeted 7.5 billion euros deficit, the finance ministry's figures showed. In the same period last year, the country posted a 13.2 billion-euro deficit.

The deficit now stands at 1 percent of gross domestic product, from 6.8 percent in the same period last year, Staikouras said.

Greece has depended on international rescue loans since 2010. In return, it has pledged to overhaul its economy, and has imposed repeated waves of austerity measures. It has reduced spending across the board, including cuts to state salaries and pensions, and increased taxes.

The improvements in the budget this year were achieved by a combination of cutting spending and increased revenues in some taxes.

It was also helped by a one-off payment of about 1.5 billion euros from other European central banks. The money came from Greek government bonds that the European Central Bank had bought earlier during the financial crisis. Rather than keep the money accrued on the bonds, the ECB handed it down to the 17 national central banks in the eurozone, who in turn gave it to the Greek government.

Despite the improvements, however, the economy remains mired in the sixth year of a deep recession that has seen Greece's economy shrink by about a quarter. Experts also predict that Greece will need to rework its debt.

"The Greek GDP figures, which suggest that the economy may have expanded in Q2, confirm that Greece has benefited from the recent period of relative calm and stability," according to a research brief by Capital Economics. "But a strong and sustained expansion is still a long way off and another major debt restructuring is still likely to be needed."

Figures released by the statistical authority Monday show economic output shrank by 4.6 percent in the second quarter of 2013, compared with the same three months last year. The figures were not seasonally adjusted.