Greece to miss budget deficit targets in 2011 and 2012

Greece has said its budget deficit will be cut in 2011 and 2012, but that it will still miss targets set by the EU and IMF.

The 2011 deficit is projected to be 8.5% of GDP, down from 10.5% in 2010 but short of the 7.6% target.

The government, which on Sunday adopted its 2012 draft budget, blamed the shortfall on deepening recession.

Stock markets fell on the news, with Hong Kong down 5% midway through the day and Australia closing 2.7% lower.

The figures come as inspectors from the International Monetary Fund (IMF), European Union (EU) and European Central Bank are in Athens to decide whether Greece should get a key bail-out instalment.

Greece needs the 8bn euros (£6.9bn; $10.9bn) instalment to avoid going bankrupt next month.

Bankruptcy would put severe pressure on the eurozone, damage European bank finances and possibly have a serious knock-on effect on the world economy.

The Greek finance ministry said on Sunday that its unpopular austerity measures would have to be adhered to even if the latest targets were to be met.

It said: "Three critical months remain to finish 2011, and the final estimate of 8.5% of GDP deficit can be achieved if the state mechanism and citizens respond accordingly."

It released figures for 2012's projected deficit, putting it at 6.8% of GDP, also short of the 6.5% target.

The data came as the government met to approve Greece's draft budget for next year.

It blamed an economic contraction this year of 5.5% - rather than May's 3.8% estimate - for the failure to meet deficit targets.

The cabinet meeting also approved a measure to put 30,000 civil service staff on "labour reserve" by the end of the year.

This places them on partial pay with possible dismissal after a year.

"The labour reserve measure was approved unanimously," one deputy minister told Reuters.

This measure, along with other wage cuts and tax rises, have been part of a package intended to persuade the so called "troika" of the EU, IMF and ECB to continue with its bail-out.

Eurozone finance ministers are due to meet in Luxembourg later on Monday where they will discuss Greece's progress towards putting its finances in order.

They are expected to get updates from EU Economic and Monetary Affairs Commissioner Olli Rehn on the IMF's position.

The Greek austerity measures are hugely unpopular at home and have led to a wave of strikes and protests.

Many Greeks believe the austerity measures are strangling any chance of growth.