Greece has acknowledged it will breach conditions for a new instalment of a €110 billion bail-out as the IMF and EU began an audit of the country's austerity measures.
Greece's Socialist government faced a week of tough talks with its benefactors and although bolstered by sweeping successes in local elections yesterday, the outlook is still overshadowed by gloom on the economic front.
The Eurostat statistics agency issued its final revision of Greece's accounts for the past four years, triggering a new forecast by Athens that its public deficit in 2010 would reach 9.4% of output, well above the 8.1% target.
Elsewhere, Portugal is at a high risk of needing a bailout due to the danger of contagion from other debt-hit euro nations, the country's finance minister said in comments carried by the Financial Times.
‘The risk is high because we are not facing only a national or country problem,' the FT website quoted Fernando Teixeira dos Santos as saying in reference to the possibility that Lisbon will need international financial assistance.
‘It is the problems of Greece, Portugal and Ireland. This is not a problem of only this country,’ he added.
Greek bond yields, a measure of investor confidence in the country's finances, rose today, with the rate on 10-year paper up to 11.280% from 11.184% on Friday.
Having flirted with insolvency until it was rescued by the International Monetary Fund and EU in May, Greece sought to reassure its partners that despite the latest figures, it remained on course.
It said it had in effect reduced its public deficit by a greater percentage than pledged as part of the €110 billion EU-IMF rescue.
'Despite the revision of the figures, the 2010 deficit reduction is greater than was initially planned, equivalent to six percentage points of GDP when the objective was to get 5.5%,' the finance ministry said in a statement.
The 8.1% target was set when Greece's 2009 public deficit was estimated at 13.6% of GDP.
But as part of the bailout, Greece was obliged to allow Eurostat to review its unreliable accounts and the EU agency revised the 2009 deficit up to 15.4%.
The 2009 figure is important because it is the baseline for the amount by which Greece must cut its public deficit this year. The bigger the deficit last year, the more it has to do to meet rescue conditions this year.
Senior officials from the EU, the European Central Bank and the IMF have begun a review the government's actions to redress the public finances with structural reforms.
The government is to present its 2011 budget to parliament on Thursday.
Prime Minister George Papandreou said that talks were underway on the possibility that Greece might be able to prolong the period of repayment of the rescue funds beyond the intended date of 2015.
The EU-ECB-IMF team will decide at the end of its mission if a third instalment of its rescue package worth €9.0 billion will be paid.
The country has already received €30 billion in exchange for radical austerity measures and deep reforms of the economy.
