GREEK BUDGET FORECASTS GROWTH, BUT SKEPTICS ABOUND
c.2013 New York Times News Service
ATHENS, Greece — Greece on Thursday outlined a 2014 budget that predicts a return to economic growth after six straight years of recession, putting the country’s prospects in an optimistic light.
But it came just two days after the Organization for Economic Cooperation and Development forecast that the Greek economy would shrink again next year. And the budget, which was presented to Parliament, has not received the necessary approval of the country’s trio of international creditors.
On Thursday, representatives of those creditors left Athens without an agreement with the government on the size of a projected budget gap next year and on the possible need for additional spending cuts.
At a news conference later Thursday in Brussels, Simon O’Connor, a spokesman for one of those creditors, the European Commission, said there were still “issues to be resolved” before those lenders could approve the Greek budget.
It was a reminder that Greece — which has received two rounds of international bailouts totaling 240 billion euros, or $323 billion, since 2010 — is still far from autonomous when it comes to managing its finances.
The Greek economy, which has shrunk by one-fourth since 2007, is projected to grow 0.6 percent next year, according to the government’s budget that was released Thursday. But this week the OECD, which represents the world’s most advanced economies, forecast that the Greek economy would contract 0.4 percent next year.
The government projections “aim to create some optimism in Greece, and in the markets, but they are precarious. They depend on so many variables, such as whether Greeks will pay their taxes and other uncertain factors,” said Manos Giakoumis, an economist and head of equity research at Euroxx Securities, a brokerage firm in Athens. “It’s far from certain that these targets can be reached.”
The government blueprint also predicted a primary surplus — a budget surplus that excludes debt payments — of €812 million for this year and €2.95 billion for 2014. That was an upward revision from previous forecasts of €344 million and €2.8 billion.
Unemployment, according to the government, would improve slightly, to 24.5 percent next year from 25.5 percent this year.
“It is a blueprint that takes into account the first positive signs seen in 2013, which are the outcome of the major sacrifices of Greek society,” Christos Staikouras, a deputy finance minister, told reporters. He added that the conditions were being created for Greece to return to the international bond markets next year, after three years of reliance on bailout loans.
Outside experts do not necessarily share his optimism. “Greece will have difficulties returning to the markets before some kind of reduction to the country’s debt, which, as we know, creditors are reluctant to offer,” said Giakoumis, the economist.
The budget is only theoretical at this point. Parliament plans to vote on it Dec. 7 or Dec. 8. After that, it will require revision as Greece and its creditors continue to haggle over how to close a fiscal gap for next year. The lenders peg the gap at more than €1.5 billion — three times Greece’s original estimate.
The impasse has fueled speculation in the Greek news media about the need for further austerity measures, although government officials have insisted that any gap would be plugged with “structural reforms” rather than further spending cuts. Finance Minister Yannis Stournaras said in Parliament on Thursday that there would be “no more horizontal measures,” a reference to the across-the-board cuts to salaries and pensions that have lowered Greek living standards.
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In a joint statement Thursday morning, Greece’s three international creditors — the European Commission, the European Central Bank and the International Monetary Fund — said “good progress has been made, but a few issues remain outstanding,” adding that the review would resume in early December.
Greek government officials have said they hope a deal will be reached with the creditors before a meeting of the Eurogroup of eurozone finance ministers Dec. 9. But the creditors are getting restless. In comments to Greece’s Ta Nea daily that were published Thursday, Jeroen Dijsselbloem, the head of the Eurogroup, said a deal must be reached quickly, because “many eurozone finance ministers have started to lose patience.”
Apart from the looming fiscal gap, negotiations between Greece and foreign auditors have also snagged on issues including an unpopular property tax that combines several levies, including one attached to homeowners’ electricity bills. The creditors have said that they doubt it will raise enough money.
Nor, before they left Athens, did the creditors reach an agreement on the economic overhauls that Greece must enforce to secure its next installment of bailout money, worth €1 billion. These changes include a plan for forced transfers and layoffs in the Civil Service and the streamlining of EAS, an unprofitable state-owned producer of military equipment.
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Prime Minister Antonis Samaras, who faces the difficult task of satisfying foreign creditors while keeping an increasingly fragile coalition government together, is set to meet in Berlin on Friday with Chancellor Angela Merkel of Germany. Merkel, speaking at an economic conference Thursday, said Greece had achieved “very noteworthy reforms.”
Samaras is expected to emphasize his government’s inability to impose further austerity measures amid growing political and social tension. This month, his coalition’s wafer-thin majority in Parliament was reduced to four seats, after a coalition lawmaker backed a motion by a leftist opposition party, Syriza, for a vote of no confidence in the government and was ejected from the coalition. The leftists, which oppose Greece’s bailout, lost the motion but are gaining in opinion polls.
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In comments to reporters Thursday, after a meeting in Athens with Penny Pritzker, the U.S. commerce secretary, Samaras said the first signs of recovery in Greece — including projections for a primary surplus, a current-account surplus and a foreign trade balance — offered “major investment opportunities in our country.”
Pritzker said she saw “many opportunities” for the United States and Greece to “do more business together” and called on the government “to increase transparency in public procurements” to help non-Greek companies compete for government contracts in sectors such as energy and health care.