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Athens - Debt-stricken Greece claimed dramatic progress Monday in its quest to tackle overspending, with the budget deficit slashed 42% and the finance minister raising hopes the economy will do better.
Earlier this year the country was threatened with insolvency, sparking a eurozone debt crisis, but the ruling Socialists said Greece had turned a corner by tightening public finances, increasing tax revenue and improving efficiency.
"Today we are able to see our country's future with greater optimism. Greece is successfully escaping the reef of economic collapse," government spokesperson George Petalotis told reporters.
Finance Minister George Papaconstantinou announced earlier that the country had "met its goal" for the first six months of 2010 after central bank figures showed the budget deficit had been cut by almost 42% in that period.
Papaconstantinou also expressed optimism that the recession gripping the economy could be less serious than originally feared.
The budget shortfall in January-June came to €11.45bn, down from €19.69bn in the first half of 2009, according to the central bank.
In June alone, the budget deficit narrowed to €1.91bn from €5.06bn a year earlier.
Papaconstantinou said the budget deficit - which covers central government spending - amounted to 4.9% of Gross Domestic Product in the first half of the year, a major step towards meeting EU fiscal rules.
Under EU rules, a member state is required to keep its public deficit - central government spending plus welfare and local authority expenditure - below 3% of GDP.
Guarded optimism
Papaconstantinou said the government would soon make public its estimate of the public deficit for the first half of the year.
"The goal for the year is to reduce the public deficit by 40% and we are doing better than that," he said, adding that he had "guarded optimism" on the implementation of tough austerity measures - tax rises and public sector wage cuts - aimed at shoring up the country's parlous public finances.
The Socialist government has committed itself to reducing the public deficit to 8.1% of GDP this year from around 14% in 2009.
The austerity measures were approved by the administration of Prime Minister George Papandreou in exchange for back-up loans worth €110bn from the European Union and the International Monetary Fund.
Greece has amassed a debt mountain approaching €300bn which the government blames on decades of state mismanagement topped by unchecked employment and generous pay increases in the country's gigantic bureaucracy.
The tax drive and wage and pension cuts have improved the state finances but the Greek economy is now shrinking at an alarming rate.
The last official estimates - on which the EU-IMF rescue loan was based - forecast a 4% contraction this year but Papaconstantinou on Monday said 2010 could close with a loss "of perhaps around 3%."
The government's tough austerity policies have attracted strong opposition from unions and leftist parties, and a series of general strikes and protests have been held in recent months.
Another general strike will be held on Thursday as parliament prepares to vote on a controversial pension reform raising the general retirement age to 65 years for men and women for the first time.
- AFP
