07 October 2013

WSJ: Greek draft budget sees primary surplus, return to growth

The Greek government has presented a draft budget that forecasts a return to growth next year and an operating surplus that Athens hopes will allow it to return to bond markets for the first time since the debt crisis began.

In an ambitious fiscal plan that could still be derailed by the volatile political environment, the draft 2014 budget targets further cuts in spending and seeks higher revenue from taxes in an effort to meet the goals set by Greece's international creditors.

According to the draft budget, the Greek economy is expected to grow 0.6 per cent next year, after an upwardly revised 4 per cent contraction in 2013—slightly better than initial forecasts. Unemployment, which was recently about 28 per cent of the workforce, is expected to ease to 26 per cent on average in 2014.

At the same time, Greece is forecasting a primary budget surplus—before counting debt payments—of €2.8 billion, or 1.6 per cent of gross domestic product. For this year, Greece says it will achieve a small primary surplus of €340 million, its first since the crisis began in late 2009.

Experts from the European Union and the International Monetary Fund, who have helped bail out Greece twice, will return to Athens later this month to review the budget in detail and decide whether Greece has done enough to receive more financial aid.

"From this year, the sacrifices are starting to take hold, creating the first signs of the country's exit from the crisis", Deputy Finance Minister Christos Staikouras said at a news conference. "With the state budget for 2014, these first significant achievements are being capitalised on, consolidating the stabilisation of public finances and improving conditions for the gradual return to a growth path."

The EU and the IMF, however, aren't convinced about the targeted primary surplus for next year. According to their estimates, the Greek government could be looking at a potential €1 billion to €1.5 billion budget shortfall next year, and may demand further cutbacks.

Full article

© Wall Street Journal