Greek budget sees country turning corner in 2014

ATHENS: The Greek economy will turn a corner next year, the government’s 2014 draft budget forecast on Monday, ending six years of recession and stabilising its debt.

“We foresee the end of recession in 2014” with growth of 0.6 percent, Vice Finance Minister Christos Staikouras said.

The pledge for a turnaround comes after years of deeply painful recession and had initially been tabled for this year.

But the Greek economy is now expected to contract by 4.0 percent in 2013.

Greece lurched into recession when the global economic crisis hit in 2008, and by 2010 rising borrowing costs on its massive debt forced Athens to seek a bailout from the EU and IMF.

Two bailouts, worth up to 240 billion euros plus about 100 billion euros in a debt write off, helped stave off a feared breakup of the euro and kept the Greek state financially afloat.

However they came at a stiff cost to Greeks. In order to tap the bailout loans the Greek government had to raise taxes while cutting benefits, wages, and jobs.

Since 2008, the unemployment rate has tripled to 27.6 percent while the economy has contracted by 22 percent.

“The sacrifices the Greek people have made after a painful period are bearing fruit, we have the indications of exiting the crisis in 2014,” Staikouras said.

The draft budget foresees a surplus excluding debt service charges of 2.8 billion euros ($3.8 billion) or 1.6 percent of GDP.

Already this year, Greece is in line to generate its first so-called primary budget surplus, of 340 million euros, he added.

Generating a primary budget surplus is essential for Greece if it wants to discuss easing its debt burden with its international creditors, the European Union and International Monetary Fund.

The country’s debt is expected to fall slightly next year to 319.4 billion euros, down from 321 billion this year. As a percentage of gross domestic product, that is steady at 174.5 percent.

The public deficit is forecast to stay steady at 2.4 percent of GDP.

The unemployment rate is seen as dipping to 26 percent.

Even if the Greek economy begins turning the corner next year, the Greek people might feel much in the way of benefits, analysts said.

“The worst scenario would be the creditors demanding Greece to implement new austerity measures” on an exhausted populace to close a 2014 financing gap, said one European source.

“That would give a final chance for populists and extremists to try to derail all of the progress we have made,” Prime Minister Antonis Samaras said recently.

The government recently cracked down on the neo-Nazi Golden Dawn party, charging its leadership as a criminal organisation following the murder of an anti-fascist musician.

Formerly on the fringe of Greek politics, Golden Dawn has skyrocketed to popularity by tapping into widespread anger over the unpopular reforms.

The draft budget, which was discussed with auditors from the EU, IMF and European Central Bank during their visit to Athens last month, was submitted to parliament on Monday.

A final version is expected to be submitted to parliament next month.