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Greece passes next year budget

PUBLISHED : Sunday, 08 December, 2013, 12:50pm
UPDATED : Sunday, 08 December, 2013, 12:50pm

Greek lawmakers passed the government’s next year budget, which forecasts a return to growth after six consecutive years of deep recession, early Sunday.

However, its revenue and spending targets have been contested by the country’s creditors who have provided more than 240 billion euros (HK$2.55 trillion) in bailout aid since 2010 to keep heavily indebted Greece from going bankrupt.

As expected, the government coalition of conservatives and socialists held together for the vote, shortly after midnight Saturday, with 153 lawmakers in the 300-member parliament voting for the budget, 142 voting against and one voting “present.” A deputy and ex-minister from the ruling conservative New Democracy party was absent and three lawmakers from the extreme-right Golden Dawn party, including its leader, could not vote, because they have been jailed pending trial on charges of membership in a criminal organisation.

“This is the first decisive step in exiting the bailout,” prime minister Antonis Samaras said in his speech that concluded a three-day debate.

He noted that the budget forecasts a modest growth for the economy, 0.6 per cent next year, the first positive figure since 2007. Greece has been through six years of deep recession that have shrunk its economy nearly 30 per cent. The economy will still shrink 4 per cent this year, still better than forecast earlier, as Samaras noted.

Samaras said his government had exceeded 4 of 5 major targets it had set in the this year, coming up short only on unemployment, which remains stuck above 27 per cent. But, he said, there were “revolutionary” developments this year, such as a small primary surplus of 800 million euros and a current account surplus, both for the first time in decades. The primary surplus — that is, revenue exceeding spending, excluding the cost of servicing the debt — is set to rise to 3 billion euros next year and further in later years, eventually leading to overall surpluses. “It means that we will no longer need additional borrowing,” Samaras said, adding that this meant that Greece only needed a further 10 billion euro haircut in its debt next year to make it viable. The haircut, in principle agreed by Greece’s creditors once it achieved primary budget surpluses, is a politically sensitive issue, because, unlike the massive 172-billion-euro debt write-down agreed last year, which affected private bondholders, it would affect the creditors, including the European Union, directly.

The creditors, however, have disputed the Greek government’s figures, arguing the surpluses will be less than advertised and that further belt-tightening measures will be needed. Disagreements on issues such as the fate of Greece’s defence industries (which the creditors want liquidated), public sector layoffs and mortgage foreclosures have led to a suspension of the talks with the creditors and a delay in bailout funding.

Late on Saturday, minutes before the vote on the budget, both the International monetary Fund and the European Commission released statements that talks of their delegation heads with Greek officials will resume in January, and not next week as the Greek government has announced.

“Technical discussions are expected to continue in Athens next week. We expect a full negotiating team to return to Athens in January, after the authorities have made further progress in implementation, with the objective of reaching a staff level agreement,” an IMF spokeswoman said.



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