Government figures show that Greece is on course to miss the budget deficit targets set by the EU and the IMF for 2011 and 2012.

George Papandreou, Greek premier, as Greece is to miss deficit targets (Reuters)

The draft budget for 2012, approved by the Greek cabinet on Sunday, predicts a deficit of 8.5 per cent of gross domestic product (GDP) for 2011, short of the 7.6 per cent target which was agreed as part of July's bailout package for Greece.

For 2012, the deficit is predicted to fall to 6.8 per cent of GDP, short of the 6.5 per cent target.

The Greek government blamed the shortfall on a deepening recession, saying that GDP is predicted to fall by 5.5 percent this year, but the cabinet said that austerity measures would be adhered to.

"Three critical months remain to finish 2011, and the final estimate of 8.5 per cent of GDP deficit can be achieved if the state mechanism and citizens respond accordingly," the finance ministry said in a statement.

The news comes as inspectors from the International Monetary Fund (IMF), EU and European Central Bank are in Athens to explore the possibility of a bailout to prevent the country from going bankrupt.

As part of the budget plan, the cabinet agreed a plan to create a "labour reserve", which would allow 30,000 state worker to be on 60 per cent pay, with the possibility of dismissal after a year.

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