Prime Minister John Key says the European debt crisis is the biggest threat to the New Zealand economy.

He said he was less confident now than at the time of the May 24 Budget that New Zealand would get back into surplus by 2014-15 but insisted: "We won't let that target slip lightly."

And Treasury officials were looking further into why Reserve Bank forecasters last week plumped for a return to surplus two years later, in 2016-17.

Mr Key was commenting on the election of pro-austerity parties in Greece which lessened the chances of Greece leaving the eurozone and deepening the crisis.


"In terms of what that means for New Zealand it doesn't really change anything. The European debt crisis remains the biggest threat to the New Zealand economy by some margin."

Mr Key said immediate market reaction had been positive, "but I don't think too many people are popping champagne corks just yet".

Asked how confident he was of reaching the surplus target, the Prime Minister said: "I'm a little less confident because of Europe in general but let's see how things play out over the next three to six months."

The Government still had room to move because of the $800 million new operating allowances in the next Budget and $1.2 billion in the one after that.

"We are not going to get to the surplus in [2014-15] come hell or high water."

If doing so was going to drag the economy back into recession he did not think it would be worth it.

Mr Key said the forecasts of Reserve Bank Governor Alan Bollard varied from the Treasury's in two main areas: New Zealand's overseas earnings and growth.

"Alan Bollard may well be right," Mr Key said. "Treasury may well upgrade their numbers and decide they are more in tune with the Reserve Bank. I don't know and none of us really know at the moment.


"It's just a very uncertain time."