10/02/2011 10:02 EDT | Updated 12/02/2011 05:12 EST

Greek cabinet set to finalize 30,000 civil service personnel cuts

ATHENS, Greece - Greece won't meet 2011-2012 deficit targets imposed by international lenders as part of the country's bailout, the Finance Ministry said Sunday.

The country's deficit this year is expected to reach 8.5 per cent of gross domestic product, or €18.69 billion ($25.2 billion) — higher than the targeted €17.1 billion ($23.1 billion), which would have been 7.8 per cent of GDP, the ministry said.

Greece has been reliant since May 2010 on regular payouts of loans from a €110 billion ($150 billion) bailout from other eurozone countries and the International Monetary Fund. It was granted a second €109 billion package in July, but details of that deal remain to be worked out.

The Finance Ministry said the missed target was because of a deeper-than-expected recession, with the economy contracting by 5.5 per cent instead of the 3.8 per cent estimate made in May. It implied the deficit could even exceed this level by the end of the year unless all new austerity measures were implemented.

"The final estimate for a deficit equal to 8.5 per cent of GDP can be achieved, if there is a proper response by the state authorities and the citizens themselves, on whose stance the country's financial ... and social future depends," the announcement said.

The announcement reflects the government's frustration with tax collection, which they blame on tax inspectors' lax performance, and its fear that citizens, angry at seeing their wages shrink and, at the same time, having to pay an increasing amount of one-off taxes, would refuse to pay.

There are already widespread calls not to pay a property surcharge, to be included in the next batch of state electricity company bills, despite the fact that delinquent payers are threatened with having their houses disconnected from the grid. The government hopes that revenue from the property levy will raise about €2 billion ($2.7 billion) in 2011 and a similar amount in 2012.

The 2012 budget is projected to reduce the deficit to €14.68 billion ($19.82 billion), or 6.8 per cent of GDP. Excluding serving Greece's debt, the budget is projected to have a primary surplus of €3.2 billion, or 1.5 per cent of GDP, meaning that Greece's debt will stop growing, as a percentage of GDP.

The Cabinet also was also expected to approve a plan to cut civil service staff by about 30,000 by the end of the year. It is still in session.