Greece to submit draft budget

Mon, Oct 1, 2012, 01:00

Greece will frontload painful budget cuts to end a decade of primary deficits while grappling with a sixth year of recession, according to a 2013 budget draft aimed at satisfying international lenders.

The government will unveil a tough austerity budget later today, after finance minister Yiannis Stournaras meets the troika of International Monetary Fund, European Commission and European Central Bank inspectors for any last-minute tweaks.

Government officials said Greece will aim for a primary surplus before debt service of 1.1 per cent of GDP next year, from a 1.5 per cent deficit in 2012, the first positive balance since 2002.

But the economy will continue to shrink for the sixth year in 2013 by 3.8 to 4 per cent.

Greece's economic output will have declined by a quarter since 2008 in a vicious spiral of austerity and recession, with the most heavily indebted euro zone nation repeatedly falling behind in meeting targets set under its EU/IMF bailouts and at risk of being forced out of the single currency area.

Analysts said even the recession scenario set out in the budget appeared optimistic, given Greece's slow reform efforts and a weakening euro zone economy.

"The euro zone crisis is still in full throes, so uncertainty and the downward pressure on demand that austerity will have makes even that forecast look optimistic," said Chris Williamson, chief economist at London-based firm Markit.

Reuters