Greek Deficit Shoots Up; Citigroup Trader Paul Moss Probed for False Speculation

ATHENS, Greece -- This country's 2010 deficit shot up significantly more than anticipated, European Union data revealed today, signaling ailing attempts by the government in Athens to rein in the country's runaway finances and avoid a painful debt makeover.

At 10.5 percent of the country's gross domestic product -- well above the 9.4 percent forecast -- the Greek deficit ranked second highest in the European Union last year, according to a statement from Eurostat, the EU's statistics agency. Crisis-hit Ireland topped the list with 32.4 percent, while the U.K. ranked third with 10.4 percent.

While a sharp revision of the Greek deficit plunged Europe into its debt crisis in late 2009, Tuesday's rewrite was widely anticipated. Even so, it marked the latest setback in this crisis-hit country's bid to meet stringent targets set under a $148 billion rescue package cobbled together last year by its European peers and the International Monetary Fund.

Tough austerity measures, including salary and pension cuts that were implemented in exchange for the bailout, have slashed government waste. But rampant tax evasion, a recession that has contracted the economy by 4.5 percent and an alarming spike in unemployment have stifled the country's ability to generate revenues.

"The revision is an admission of the government's failure to manage the financial crisis," said Notis Mitarakis of the conservative New Democracy party, which voted against the bailout scheme. "Despite the sacrifices that the Greek people have endured, the EU/IMF plan is proving ineffective, leading to higher unemployment and market paralysis."

The finance ministry in Athens said in a statement that the one-point miss -- a revenue shortfall of $3.3 billion -- was the result of "the deeper than anticipated recession that affected tax collection and social security contributions." It said the government remained committed to achieving its targets, including a deficit reduction to under 1 percent by 2015.

A team of EU and IMF officials is due in Athens next week for what pundits and politicians anticipate as the most crucial assessment yet of Greece's struggling reforms. A negative review may force Greece's international lenders to freeze further financial aid to Athens.

With Greece's debt swelling to 142.8 percent of its economic output and forecast to reach 160 percent in the next year, international investors and the market remain skittish about the country's chances of steering clear of a default.

The government in Athens has ruled out a debt restructuring plan, saying it would devastate domestic banks that hold much of the state debt.

"I don't think that Greece will succeed in this consolidation strategy without any restructuring," Lars Feld, a member of German Chancellor Angela Merkel's council of economic advisers, told Bloomberg Television on Tuesday. "I think that Greece should restructure sooner than later."

So, too, do international investors argue.

On Tuesday, a London trader with U.S. bank Citigroup faced Interpol investigators for circulating chatter last week that Athens would be forced to restructure its national debt imminently. The trader, identified as Paul Moss, was brought in for questioning after Greece's cybercrime division traced his suspicious emails to a London office's computer address, senior police officials told AOL News.