Greek debt-crisis woes worsen

[April 22, 2010]  ATHENS, Greece (AP) -- Civil servants staged a 24-hour strike Thursday against austerity measures and expected job cuts by Greece's crisis-plagued government, while the EU's statistics agency added to the financially stricken country's woes, revising its budget deficit upwards.

Caption: IMF and EU finance officials leave after talks at the Greek Finance Ministry, in central Athens, on Wednesday. Officials from the IMF, European Central Bank and EU Commission are in Athens to discuss terms of a potential rescue package for debt-strapped eurozone member Greece. (AP photo by Nikolas Giakoumidis)

Eurostat said Greece's budget deficit in 2009 was 13.6 percent of gross domestic product, instead of the previously predicted 12.9 percent, while the ratio of government debt to GDP stood at 115.1 percent, the second highest in the EU after Italy.

The agency also expressed "a reservation on the quality of the data reported by Greece," and said the 2009 figures could be revised further, to the tune of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt.

The revision came as the civil servants' strike disrupted public services, shut down schools and left state hospitals working with emergency staff. Protesters from a Communist-backed trade union continued to blockade Athens' main port of Piraeus, disrupting ferry services.

But airports remained open after air traffic controllers suspended their participation in the strike because of the travel chaos caused by Iceland's volcanic ash cloud.

About 3,000-4,000 protesters marched through central Athens, carrying banners reading "tax the rich" and " don't take the bread from our table."

Scuffles broke out when a group of about 150 demonstrators challenged police lines near the city's central Syntagma Square. Police responded with small amounts of tear gas.

Labor unions fear deeper cuts after the Socialist government began talks this week with the International Monetary Fund, the European Central Bank and the European Commission for a three-year rescue package aimed at easing the country's acute debt crisis.

"The IMF has the same cookie-cutter solution for different eceonomies ... Now they are making a European cookie cutter," said Spyros Papaspyros, head of the civil servants umbrella union, ADEDY.

News of the revised figures sent Greece's borrowing costs shooting up to new record highs. The interest rate gap, or spread, between Greek 10-year bonds and German ones -- considered a benchmark of stability -- widened to 5.29 percentage points minutes after the announcement, from 5.03 percentage points earlier in the morning. The spreads translate into prohibitively high interest rates of more than 8 percent, more than twice those of Germany's.

Athens said that its target of reducing its deficit by at least 4 percentage points in 2010 remained unchanged despite the revision.

"The Government has already adopted all the necessary measures in excess of 6 percent of GDP to ensure the achievement of this objective," the Finance Ministry said in an announcement.

It said the new figures showed the scale of Greece's financial troubles, which it blamed on mishandling by the previous, conservative government. Athens shocked its European Union partners late last year when the newly elected Socialist government sharply revised its budget deficit figures upwards, and said the previous administration had fudged its statistics.

"Unfortunately, the fiscal problems we inherited were worse than originally envisaged and the work of restoring fiscal responsibility harder," the ministry said in its announcement. "The goal of this Government is to solve problems rather than cover them up."

Struggling to cope with a debt pile of euro300 billion ($406 billion), Greece needs to borrow about euro54 billion this year alone and has a projected public debt of more than 120 percent of gross domestic product through 2011, before easing slightly the following year.

On Tuesday, the government shaved its May borrowing requirement by raising euro1.95 billion ($2.62 billion) in a 13-week treasury bill auction that was more than four times oversubscribed. The public debt management agency said Thursday that it had accepted an additional euro450 million in non-competitive bids for the treasury bill auction, which has a settlement date of April 23.

[Associated Press; By DEREK GATOPOULOS]

Associated Press writer Elena Becatoros in Athens contributed.

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