Greek budget promises higher growth, tax
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[October 06, 2014]
By Lefteris Papadimas and Deepa Babington
ATHENS (Reuters) - Greece's government
unveiled its 2015 budget on Monday, promising a second year of growth
and tax breaks aimed at easing austerity imposed after the country sank
into its deepest post-war economic crisis.
The budget largely confirmed targets for growth and a budget
surplus before interest payments set under Greece's 240 billion euro
($300 billion) EU/IMF bailout, and said Athens planned more bond
sales after a successful return to debt markets this year.
"The country is entering into a long period of sustainable growth
and primary budget surpluses," Deputy Finance Minister Christos
Staikouras told reporters. "This is the result of unprecedented
sacrifices by Greek households and businesses."
After nearly five years hooked on EU/IMF aid that has come at the
price of painful austerity measures, Greek Prime Minister Antonis
Samaras is trying to pull the plug on the aid program in a bid to
ensure his fragile government's survival.
Greece has made progress in getting its finances back on track and
its battered economy has begun to stabilize, but it faces the threat
of snap elections and political paralysis early next year when a
crucial vote to elect a new president is held.
As part of the government's effort to rally austerity-hit Greeks and
lawmakers before the presidential vote, the budget includes
previously announced cuts to taxes introduced at the peak of the
crisis - including a 30 percent cut to both a tax on heating oil and
a special "solidarity" tax. A lowered 13 percent rate for
value-added tax at restaurants will be maintained.
That elicited little cheer on the streets of Athens, where four
years of pay and spending cuts have slashed incomes by over 30
percent and sent unemployment over 27 percent.
"It doesn't make a difference to us. We are desperate. They always
promise they'll fix things and they never do so," said Constantinos
Georgiou, 40, who works with the country's armed forces and is due
to benefit from the budget pledge to gradually raise salaries for
the uniformed services after a court ruling.
"I can hardly make ends meet."
Emboldened by two successful forays into debt markets this year
after a four-year hiatus, Athens said it would issue a seven-year
and 10-year bond as well as a Treasury bill of over 26 weeks next
It also confirmed Athens expects to report a budget surplus
excluding interest payments of 2.9 percent of GDP next year, just
shy of the 3 percent target set under the bailout. It is expected to
top forecasts to stand at 2 percent this year.
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The budget also predicted Greece's economy would grow in line with
bailout forecasts at 2.9 percent next year and 0.6 percent this
year. Debt is seen falling to a lower-than-expected 168 percent of
GDP from 175 percent this year.
Greece topped its fiscal targets
and posted a budget surplus in 2013, a year ahead of schedule,
paving the way for some form of additional debt relief from its euro
zone lenders. Talks on further debt relief will start later this
year, after EU/IMF inspectors visiting Athens conclude what is
likely to be their last joint review of the country's finances and
Athens last month announced it is hoping it can ditch its bailout
package at the end of the year, over a year ahead of its scheduled
end in early 2016.
But jitters about Greece's ability to finance itself and avoid snap
elections have added to an air of malaise around the government,
which has a slim parliamentary majority and relies on the support of
an increasingly weak Socialist PASOK party.
In a bid to quash speculation of snap elections, Samaras has called
a confidence vote this week, which he is likely to win without any
(Additional reporting by Renee Maltezou, George Georgiopoulos,
Angeliki Koutantou and Karolina Tagaris, Writing by Deepa Babington,
Editing by Jeremy Gaunt and Crispian Balmer)
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