Greece had a far larger budget deficit than expected last year and the figures may yet get worse, according to the European Union's statistics office. New data from Greece shows a gap of 13.6% of gross domestic product (GDP), not the 12.7% first reported. Eurostat, which was given new data by Greece, said doubts over the figures meant they could be revised again. The credit rating agency Moody's also cut its rating on Greek debt and warned that there could be more downgrades. Moody's cut its rating on Greek sovereign debt to A3 from A2, saying that there was "a significant risk that debt may only stabilise at a higher and more costly level than previously estimated".
The news of larger-than-expected deficit had already hit the euro and stock markets, as worries increased that Greece might default on its debts. "It looks like a terrible situation just got worse," said Nick Kounis, an economist at insurance giant Fortis. Greece is currently negotiating the details of an emergency rescue package from the eurozone and International Monetary Fund (IMF). Eurostat warned that the Greek figures may be revised further. The organisation said in a statement: "Eurostat is expressing a reservation on the quality of the data reported by Greece... this could lead to a revision for the year 2009 of the order 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 worsening figures will increase nervousness among investors when Greece tries to borrow money on the financial markets. Greece is swamped by 300bn euros of debt and needs to borrow about 54bn euros this year alone. Athens has been raising money, but at increasingly higher interest rates demanded by investors. A government spokesman said that it was Greece's intention to continue tapping the markets, and dismissed speculation that Athens was about to engage in a debt restructuring. George Petalotis said: "What we have been saying from the start is clear: We had and continue to have the intention of borrowing from the open market." He described suggestions that Greece would be forced to restructure its debts as "easy talk, and allow me to say, coffee shop talk".
Stock markets across Europe fell, and against the US dollar the euro was down to $1.3387 from $1.3410. The Greek government has said it wants to reduce the deficit to 5.6% of GDP in 2011, and 2.8% of GDP in 2012. But spending cutbacks measures being introduced by Athens to restore its finances are being resisted. On Thursday, tens of thousands of Greek civil servants staged a strike to protest against the austerity programme. Protesters have been demonstrating in Athens, not far from where officials from the IMF and European Central Bank are meeting to determine the fine details of a financial rescue package for Greece.
