Greek 2013 budget sees sixth year of recession

Mon Oct 1, 2012 1:28pm EDT
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By Lefteris Papadimas and Dina Kyriakidou

ATHENS (Reuters) - Greece unveiled on Monday an austerity budget which aims to unlock international aid by cutting public spending even harder, even though its economy is shrinking fast.

Painful cuts will be brought forward as the country faces what is expected to be a sixth year of recession.

The 2013 budget emerged as Finance Minister Yannis Stournaras met the so-called "troika" of International Monetary Fund, European Commission and European Central Bank inspectors, whose approval is vital to unlock the next installment of aid, urgently needed to avoid bankruptcy.

Greece will aim for a primary surplus, before debt servicing, of 1.1 percent of GDP next year, the first positive balance since 2002, after a 1.5 percent deficit in 2012. But the economy will shrink for a sixth year, by 3.8 percent.

There was no immediate comment from EU officials or the IMF, but Greek Finance Ministry officials said the troika still objected to some of the measures.

Economic output will have declined by a quarter since 2008 in a spiral of austerity and recession, with the most heavily indebted euro zone nation repeatedly missing targets set under its EU/IMF bailouts and at risk of being forced out of the single currency.

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 general government deficit, including debt servicing costs, will come to 4.2 percent of GDP next year from 6.6 percent in 2012, while unemployment will rise to 24.7 pct.   Continued...

Protesters shout slogans as they wait for the troika inspectors from the European Commission (EC), the International Monetary Fund (IMF) and the European Central Bank (ECB), to enter the Finance Ministry in Athens October 1, 2012. 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. REUTERS/Yorgos Karahalis