Daniel Gros
Published 21 April/Updated 27 April 2010
he magnitude of the task facing Greece is immediately slowly being admitted by policy-makers. Following the European Council meet of February of this year, the official mantra was that Greece had a plan to cut its deficit by 10% of GDP in three years and that by March it had already done enough for this year towards go through together this goal and that everything was under control. In the meantime, however, financial markets shit been displace increasingly strident signals that they have little faith in the capacity of the Greek government to actually implement this allowance account as planned. Even the most cursory glance at the official Hellenic Stability and Growth Programme1 seems to justify the wishing of faith on the part of financial markets.2 The figures in the register (reproduced in the table in the annex) suggest that a authentic part of the projected revenue increases is unlikely to materialise (at least as quickly as planned) and that the hard choices and unavoidable cuts have been postponed.
The key weakness of this figure is thus that it is not plausible in the longer-run perspective, which is what is absolutely needed given that the required long-run adjustment is a reduction in the deficit cost over 10% of GDP. A reduction of this magnitude cannot realistically be achieved in a couple of years. The Greek budget for 2010 contains measures that officially should produce an improvement in the deficit of 6% of GDP, with about two-thirds coming from revenue increases and one-third from cuts in expenditure, as shown in the table in the annex. A first mention is that successful adjustment programmes usually have the opposite diffusion between expenditure cuts and revenue increases. More in general, however, it seems that the authority for further revenue increases in the short run is limited. confirmatory taxes are the most important revenue for the government, but...If you want to get a full essay, order it on our website: Ordercustompaper.com
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