ATHENS — Offering the first real hope that Greece could emerge from a six-year recession, the government on Monday presented a draft budget for next year forecasting a tenuous return to growth.
The economy, which has shrunk by a quarter since 2007, is expected to contract 4 percent this year but grow 0.6 percent in 2014, largely the result of an increase in tourism and exports, according to the blueprint. It also predicted that unemployment would dip to 26 percent from 27 percent.
“This year, the sacrifices have begun to bear fruit, giving the first signs of an exit from the crisis,” Christos Staikouras, a deputy finance minister, told reporters. The forecast could be a turning point for a country whose tiny economy threatened the future of the euro zone.
It has been bailed out twice by international agencies and remains racked by the region’s highest unemployment and frequent public protests over government cuts. But some economists in Greece doubted that the economy was improving.
Achieving growth of any size would be “very difficult,” chiefly because there has been no significant increase in investments, Haralambos Gotsis, an economics professor at the University of Piraeus, told Greek television.
George Pagoulatos, a professor of European economy and politics at Athens University, was more optimistic. “It’s not inconceivable, it’s feasible,” he said by telephone, “as long as they stick to structural reforms and find some sort of solution to the debt.”
The hedge fund billionaire John A. Paulson also gave the battered Greek economy a vote of confidence. He told The Financial Times that he had taken substantial stakes in Piraeus and Alpha banks.
They are both “now very well capitalized” and poised to recover, he said, adding, “The Greek economy is improving, which should benefit the banking sector.”
Officials of the so-called troika — the European Central Bank, European Commission and International Monetary Fund — which have extended the country two loan packages worth 240 billion euros, or $325 billion, over the last three years, are expected to propose significant revisions to the draft budget, as they have done with previous budgets.
Mr. Staikouras predicted a small primary surplus — a budget surplus not counting debt financing — of 340 million euros for this year and a 2.8 billion euro surplus for 2014. Greek officials are eager to show a surplus, since troika officials have said it could be the basis for discussion of some kind of debt relief.
“We will seek the contribution of our partners in helping toward the lightening of the debt,” Mr. Staikouras said. Greece’s debt is 321 billion euros. Greece will continue to receive payments from the second bailout until next spring, when talks are expected to begin with international creditors on a potential third bailout.
That aid would be much smaller than the first two rounds, to cover an estimated financing gap of 11 billion euros for the next two years.
The country has gradually been paying off its debts from an account opened last year at the Bank of Greece, and will continue to do so after it returns to international bond markets in 2014 or 2015.
But given the overwhelming size of Greece’s debt, about 175 percent of its total economy, it remained unclear when Greece will be able to stop paying off what it owes with borrowed money.
Euro zone officials, in particular those in Germany, which has contributed the largest share to Greece’s bailouts, have repeatedly rejected the prospect of a second debt loss for Greece’s creditors after a write-down of privately held Greek debt last year.
Other relief has not been ruled out, including a further reduction in interest rates and an extension on maturities on loans. The International Monetary Fund has been more open to a possible loss to make Greece’s debt sustainable.
And many prominent economic specialists have expressed doubt there is any other viable solution for Greece. In an interview with Der Spiegel of Germany published on Monday, the billionaire investor George Soros said there was no other choice.
“Everyone knows that Greece will never be able to pay off its debts,” he said. Mr. Soros added that private investors would return to Greece only if the “official sector” eased some of its demands.
Talks with troika officials will resume next week on the progress of Greek economic overhaul efforts, including what to do about the financing gap of 11 billion euros.
After the troika envoys suggest amendments to the draft budget and issue their next economic review next month, the budget will go to a vote in the Greek Parliament.
nytimes.com
The economy, which has shrunk by a quarter since 2007, is expected to contract 4 percent this year but grow 0.6 percent in 2014, largely the result of an increase in tourism and exports, according to the blueprint. It also predicted that unemployment would dip to 26 percent from 27 percent.
“This year, the sacrifices have begun to bear fruit, giving the first signs of an exit from the crisis,” Christos Staikouras, a deputy finance minister, told reporters. The forecast could be a turning point for a country whose tiny economy threatened the future of the euro zone.
It has been bailed out twice by international agencies and remains racked by the region’s highest unemployment and frequent public protests over government cuts. But some economists in Greece doubted that the economy was improving.
Achieving growth of any size would be “very difficult,” chiefly because there has been no significant increase in investments, Haralambos Gotsis, an economics professor at the University of Piraeus, told Greek television.
George Pagoulatos, a professor of European economy and politics at Athens University, was more optimistic. “It’s not inconceivable, it’s feasible,” he said by telephone, “as long as they stick to structural reforms and find some sort of solution to the debt.”
The hedge fund billionaire John A. Paulson also gave the battered Greek economy a vote of confidence. He told The Financial Times that he had taken substantial stakes in Piraeus and Alpha banks.
They are both “now very well capitalized” and poised to recover, he said, adding, “The Greek economy is improving, which should benefit the banking sector.”
Officials of the so-called troika — the European Central Bank, European Commission and International Monetary Fund — which have extended the country two loan packages worth 240 billion euros, or $325 billion, over the last three years, are expected to propose significant revisions to the draft budget, as they have done with previous budgets.
Mr. Staikouras predicted a small primary surplus — a budget surplus not counting debt financing — of 340 million euros for this year and a 2.8 billion euro surplus for 2014. Greek officials are eager to show a surplus, since troika officials have said it could be the basis for discussion of some kind of debt relief.
“We will seek the contribution of our partners in helping toward the lightening of the debt,” Mr. Staikouras said. Greece’s debt is 321 billion euros. Greece will continue to receive payments from the second bailout until next spring, when talks are expected to begin with international creditors on a potential third bailout.
That aid would be much smaller than the first two rounds, to cover an estimated financing gap of 11 billion euros for the next two years.
The country has gradually been paying off its debts from an account opened last year at the Bank of Greece, and will continue to do so after it returns to international bond markets in 2014 or 2015.
But given the overwhelming size of Greece’s debt, about 175 percent of its total economy, it remained unclear when Greece will be able to stop paying off what it owes with borrowed money.
Euro zone officials, in particular those in Germany, which has contributed the largest share to Greece’s bailouts, have repeatedly rejected the prospect of a second debt loss for Greece’s creditors after a write-down of privately held Greek debt last year.
Other relief has not been ruled out, including a further reduction in interest rates and an extension on maturities on loans. The International Monetary Fund has been more open to a possible loss to make Greece’s debt sustainable.
And many prominent economic specialists have expressed doubt there is any other viable solution for Greece. In an interview with Der Spiegel of Germany published on Monday, the billionaire investor George Soros said there was no other choice.
“Everyone knows that Greece will never be able to pay off its debts,” he said. Mr. Soros added that private investors would return to Greece only if the “official sector” eased some of its demands.
Talks with troika officials will resume next week on the progress of Greek economic overhaul efforts, including what to do about the financing gap of 11 billion euros.
After the troika envoys suggest amendments to the draft budget and issue their next economic review next month, the budget will go to a vote in the Greek Parliament.
nytimes.com
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