Greece budget deficits miss bailout targets

Public sector employees carry a banner, reading: "No Layoffs," as they demonstrate outside the Greek Parliament last month.

NEW YORK (CNNMoney) -- The Greek cabinet announced late Sunday that it adopted a draft budget for 2012, but the debt-ridden nation will miss key deficit targets for this year and next.

According to this preliminary budget, Greece's budget deficit will be 18.69 billion euros, or 8.5% of gross domestic product, in 2011. Greece had originally agreed to a deficit of 17.1 billion euros, or 7.8% of GDP, with the International Monetary Fund, European Commission and the European Central Bank.

That group, commonly referred to as the troika, has been in discussions over the past few weeks about whether or not to provide Greece with the next round of funding as part of a previously agreed to bailout.

Without this emergency injection, Greece is widely expected to run out of money later this month and could default.

The troika is in Athens again this week and is supposed to make a final decision on the next bailout tranche by mid-October.

The Greek cabinet said in a statement that the main reason it would miss the deficit target is due to a deeper-than-expected recession.

5 things you need to know about Europe's debt crisis

The Greek economy is now expected to contract by 5.5% this year, according to the statement. That's worse than projections of a 3.8% decline in May.

The government also hinted that the deficit could be even higher in 2011 if it is unable to successfully implement more austerity measures.

Greece has already slashed spending, reduced wages and raised taxes in an attempt to bring its debt under control and convince the troika that it should receive all future installments from its bailout package.

"We are forced to take decisions much faster than we would wish," said Prime Minister George Papandreou in an opening address to the cabinet, "due to the enormous deficit figure. That then creates recessionary problems."

Papandreou said that Greece plans to stick to every detail of its bailout agreement, however unpopular.

As part of the budget, Greece said it agreed to 6.6 billion euros more in deficit cutting measures for this year and 2012.

However, the cabinet also said that the budget deficit in 2012 was likely to be 6.8% of GDP, higher than the troika's target of 6.5%.

CNN's John Psaropoulos, Christine Theodorou, Sarah Aarthun and Per Nyberg contributed to this report.