By Angelika Papamiltiadou

ATHENS (MNI) – Greece will not meet its 7.8% deficit target for
this year, despite the new austerity measures announced by the Greek
government recently, the European Commission and the ECB said in their
joint fifth review of Athens’ economic adjustment program.

According to a copy of the report, obtained by Market News
International, the Greek deficit will remain high in 2011, between
8.5%-9.0% of GDP, versus the official target of 7.8%. The Commission
expects the country’s deficit to fall to 6.8% of GDP in 2012, but it
said that additional fiscal measures might be needed.

The Greek Parliament is expected to vote this evening on a
multi-year fiscal plan, which would bring the deficit down to 2.9% in
2014. The vote is expected to pass with a majority of 154, out of 300
parliamentary seats.

According to the report, Greece will face a deeper-than-expected
recession this year and the next.

“The contraction in economic activity in 2011, now estimated at 5.5
percent, will be deeper than in 2010. The projections for 2012 are also
revised downwards to a contraction of 2.75 percent, and modest positive
growth rates are delayed to 2013,” the report said.

“Competitiveness is slowly improving: the constant-tax inflation
rate is below the euro-area average, while overall inflation has come
down as the impact of several waves of indirect tax increases in 2010
are now fading out,” the EU-ECB document stated.

The Commission recommended that the sixth tranche of a bailout loan
to Greece be disbursed “as soon as possible,” since “the agreed prior
actions on fiscal consolidation, privatisation and market reform, which
were announced by the government, have been legislated.”

This disbursement of an amount of EUR 5.8 billion will take place
under the bilateral loans pooled by the Commission, as agreed under the
Greek loan facility agreement of May 2010. The IMF is expected to
contribute an additional E2.2 billion to this disbursement, the report
said.

A Greek government official told MNI last week that the Eurogroup,
expected to meet Friday in Brussels, should be ready to approve the loan
tranche.

[TOPICS: M$X$$$,MGX$$$,M$$CR$,MT$$$$,M$Y$$$]