Greek budget sees end to six-year recession next year

Mon Oct 7, 2013 7:28pm EDT
 
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By Lefteris Papadimas and Karolina Tagaris

ATHENS (Reuters) - Greece will emerge from six years of recession next year, a draft budget forecast on Monday, signalling the country is past the worst of a crippling debt crisis that nearly broke Europe's single currency.

Twice bailed-out Athens also confirmed it would post a budget surplus before interest payments this year for the first time in over a decade, and its battered economy won a vote of confidence from billionaire U.S. investor John Paulson.

The positive outlook marks a sharp reversal in fortunes for a nation that had become Europe's problem child, lurching from one crisis to the next as it tottered close to bankruptcy and exasperated its international partners with broken promises.

Analysts cautioned that despite the signs of economic stabilisation, Greece remained hooked on aid and that further debt relief was inevitable to bring down a level of indebtedness set to top 175 percent of gross domestic product this year.

"The key thing is that while things are improving they're doing so from a very low level in Greece. Greece still needs financial assistance from outside," said Ben May, economist at London-based Capital Economics.

"Certainly there are signs that the worst of the crisis may well be over in the euro zone in the short term but you could easily see concerns flaring up longer term."

The Greek economy, which has shrunk by about a quarter since its peak in 2007 and thrown more than one in four out of work, will grow by a modest 0.6 percent next year thanks to a rebound in investment and exports including tourism, the budget predicted.

In a further boost, Athens forecast a primary budget surplus of 1.6 percent of national output next year after posting a small surplus of 340 million euros this year.   Continued...

 
Greek Deputy Finance Minister Christos Staikouras addresses reporters after a news conference in the Finance Ministry in Athens May 10, 2013. REUTERS/John Kolesidis