The 2012 draft budget approved by the Cabinet said the budget deficit will reach 8.5 percent of gross domestic product (GDP) this year, below the initial target of 7.6 percent.

The Finance Ministry said though it will manage to bring the budget deficit down to 6.8 percent of GDP next year, it will still miss the bailout target of 6.5 percent of GDP.

“Three critical months remain for the completion of the financial year 2011, and the final estimate of 8.5 percent of GDP deficit can be achieved if the state mechanism and citizens respond accordingly,” the Finance Ministry statement said.

The announcement came while auditors from the EU, IMF and European Central Bank were in Athens to evaluate whether Greece’s austerity measures are enough to approve the release of a sixth round of bailout loans totaling $10.7 billion), under a $148-billion bailout package to avert default.

A second bailout package, worth  $146 billion, agreed to on July 21 has yet to be finalized. Greece’s Cabinet agreed to create a “labor reserve,” allowing 30,000 state workers to be placed on 60-percent pay and be dismissed after a year, to meet revised deficit targets and satisfy the terms of the EU-led rescue.

The decision will affect workers who are near pension age and due to retire within 24 months. It will also affect state companies that would merge or close.

Austerity measures, which have included periodic tax increases and public-sector salary and pension cuts over the past 20 months, have been deeply unpopular, leading to months of strikes and demonstrations.

Hundreds of striking civil servants managed to disrupt the talks between the government and its international auditors over the past few days by blocking ministries.

(MCT)