Context of 'November 20, 2009: Greece Finalises Draft Budget to Cut Deficit'

The new Greek government headed by Georgios Papandreou of the Panhellenic Socialist Movement (PASOK) announces a draft budget that will cut the Greek deficit dramatically. According to the draft, the deficit will be cut from 12.7 percent of GDP, although measures to assist the poor will also be implemented. [Reuters, 3/3/2010]

The Greek government releases a final draft of its budget that aims to cut the deficit to 8.7 percent of GDP in 2010. The deficit is now well over 10 percent, so such a reduction would show EU partners and markets that the country is trying to sort its finances out. However, the draft budget also sees public debt rising to 121 percent of GDP in 2010, from 113.4 percent in 2009. EU forecasts on Greece for 2010 are worse, with the deficit seen at 12.2 percent of GDP and national debt rising to 124.9 percent, the highest ratio in the EU. [Reuters, 3/3/2010]

Fitch Ratings cuts its assessment of Greek government debt to BBB+ and says that the outlook for the country is negative. Fitch had previously cut its rating for the debt to A-, when the Greek government revealed that its budget deficit was higher than expected. This reduction is the first time in 10 years a ratings agency has put Greece below the A investment grade. [Reuters, 3/3/2010]