Greece's Prime Minister Papandreou
Greece's Prime Minister Papandreou Reuters

The budget deficit for cash-strapped Greece is even worse than previously thought, according revised data from the European Union’s statistical office, Eurostat.

Athens’ budget deficit for 2010 was upwardly revised to 10.5 percent of GDP from the previous estimate of 9.6 percent (and well above the 8 percent target that the Greek government agreed to in exchange for the huge 110-billion-euro bailout it received last year from the EU/IMF).

The level of debt in Greece was increased to 142.8 percent of GDP from the previous 127.1 percent figure.

These numbers will likely distress both EU officials and the Greek government, which has imposed a series of harsh and unpopular austerity programs –including severe spending cuts and tax increases -- designed to bring down the debt. (These measures were at least in bringing down the budget deficit from a whopping 15.4 percent of GDP in 2009, but not by enough).

The bond markets hammered Greek sovereigns after the data was released, suggesting that investors believe the country’s debts are out of control and that bondholders will likely suffer huge losses when the existing bailout expires in 2013.

The Greek finance ministry blamed the high debt levels on a deeper-than-expected economic recession.

The Greek government remains committed to achieving its deficit targets, the ministry said in a statement.

All necessary measures in that direction are accounted for in the context of the medium-term fiscal strategy which will be submitted to parliament by 15 May.

Data also revealed more disturbing news from the Republic of Ireland, which has the highest deficit figures in Europe by far – a surreal 32.4 percent of GDP in 2010. The level of borrowing in Eire doubled in just one year, largely due to losses suffered by the nationalized Irish banks.

The United Kingdom has the third highest 2010 deficit in the EU – at 10.4 percent of GDP, Eurostat said.

The EU also said it increased the UK’s deficits from the past four years, citing, among other things, that the costs of bailing out failed banks Northern Rock and Bradford & Bingley was larger than formerly estimated.

Overall, the EU added a total of 4-billion euros ($5.8-billion) to Britain’s estimated borrowings since 2007.

The EU added that it is unclear how British military spending (particularly in Afghanistan) will impact the total debt picture,

Eurostat is expressing a reservation on the quality of the data reported by the U.K., the agency said, citing that it is concerned about the timing of the recording of military expenditures.

Portugal, which is expected to be the third member of the EU to receive a bailout after Greece and Ireland, recorded a budget deficit of 9.1 percent of GDP in 2010, well above its 7.3 percent target.

Spain, which many feared would be the next domino to fall, actually had some good news from the EU.

The Madrid government cut its deficit to 9.2 percent of GDP, slightly better than the 9.3 percent target it set for itself.

For the eurozone on the whole, budget deficits dropped to an average figure of 6 percent of GDP from 6.3 percent the prior year, suggesting the broader scope of government austerity measures are indeed modestly working.

However, public debt levels as a percentage of GDP increased to 85.1 percent in 2010 from 79.3 percent, due largely weak growth and the cost of interest payments.