UPDATE 1-Greek official: EU inspectors skeptical on deficit cuts

* EU sees Greek deficit target hard to meet – Greek official

* “Negotiations continue”

* Any extra measures to be announced after EU’s Rehn visit

(adds details)

ATHENS, Feb 25 (BestGrowthStock) – EU inspectors visiting Athens
expect declining gross domestic product and high borrowing costs
will make it hard for Greece to meet its deficit-cutting targets
this year, a senior Greek finance ministry official said on
Thursday.

“Negotiations (on measures to cut Greece’s deficit) are
continuing because they see a big slippage in targets,” said the
Greek official, who declined to be named.

The EU inspectors expected Greece would only be able to cut
its deficit-to-GDP ratio by 1.5-2.0 percentage points versus a 4
percentage points target this year, he said.

That would mean Greece would need to find another 4.8
billion euros ($6.47 billion) worth of savings to meet its
target.

A team of European Commission, European Central Bank and IMF
inspectors are visiting Athens this week to assess Greece’s
progress in dealing with its debt crisis before Greece reports
on its progress to the European Commission in mid-March.

Greece’s economy contracted more than expected in the fourth
quarter and the inspectors believe a weak economy and high
borrowing costs will affect Athens’ ability to cut its deficit,
the Greek official said.

They also say that a low level of absorption of EU funds and
an overly optimistic expectation for revenues from figthing tax
evasion will make it hard to meet the deficit reduction target.

The official said Athens would announce any extra measures
to reach targets after the inspection and a visit by European
Economic Affairs Commissioner Olli Rehn next week.

Greece shocked markets and EU policymakers when it announced
in October that its 2009 budget deficit had spiralled to 12.7
percent of GDP, raising questions about its ability to service
its debt.

It has since pledged to cut its deficit by 4 percentage
points this year and bring it down to under 3 percent of GDP by
2012.

But the plan has failed to convince markets and many EU
finance ministers, who believe more measures will be needed to
reach the targets.
Stock Market Today

(Writing by Dina Kyriakidou and Ingrid Melander; Editing by
Susan Fenton)

UPDATE 1-Greek official: EU inspectors skeptical on deficit cuts