'Greece could be bankrupt within weeks'

GREEK Government admits it won’t meet international obligations to cut deficit.

IT could be another disastrous day on the sharemarket - and here's why.

Overnight the Greek Government produced its draft budget for 2012 in which they concede they won’t meet the 6.5 per cent deficit target they agreed with international creditors.

Greece relies on regular payouts from a $152.7 billion bailout from other eurozone countries and the International Monetary Fund.

That funding could be pulled if Greece doesn’t meet its deficit targets.

The debt-sticken country has previously warned that if it does not receive the bailout money, it would go bankrupt within weeks.

Debt inspectors are in Athens reviewing reforms to see if it qualifies to receive the next $11 billion instalment of its bailout.

A Greek debt default would ruin the balance sheets of many European banks and damage the prospects for a single Euorpean currency – the Euro.  

In short, that would be financial chaos – again.

Greece's finance minister Evengelos Venizelos said his country would not be made a "scapegoat" for wider debt troubles as he went into talks with his 16 euro-area counterparts.

Mr Venizelos, on Sunday announced new budget cuts for 2012 in a bid to satisfy international auditors.

Among those cuts is a plan to trim the public service by putting staff nearing retirement age on “reserve” or suspending them a reduced pay.

The sacked workers would receive 60 per cent of their salary for a year before they would be dismissed.

The plan is controversial in Greece as state workers make up a fifth of the country’s  workforce and are guaranteed jobs for life as the constitution bans firing of government employees in almost all circumstances.  

Immediate financial implications

The news forced European stocks down overnight but off their early lows, while the euro dropped to levels last seen in January.

The Australian dollar was also down trading at 95.74 US cents.

European markets chalked up heavy falls, in line with Asian trade, on the first trading day of the fourth quarter after Greece said the 2011 budget deficit would come in at 8.5 per cent of GDP, well short of its 7.4 per cent target.

At close, London's FTSE-100 index of leading shares was down 1.03 per cent to 5,075.50 points.

In Frankfurt, the DAX fell 2.28 per cent to 5,376.78 points and in Paris the CAC-40 shed 1.85 per cent to 2,926.83 points.

Elsewhere in Europe, Madrid lost 2.26 per cent, Milan 1.31 per cent, Amsterdam 1.62 per cent and Brussels 1.62 per cent.

On Wall street it was a now-familiar sea of red.

Despite a brief rally on news that a key indicator of the health of the US manufacturing sector was better than expected, the main indexes ended down.

The Dow Jones Industrial Average was down 258.15 points (2.37 per cent) at 10,655.23 at the close.

The S&P 500 fell 32.22 (2.85 per cent) to 1,099.20, and the tech-heavy Nasdaq fell 79.57 points (3.29 per cent) to 2,335.83.