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Greece’s Budget to Frontload Cuts

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A government official has said that the Greek draft budget frontloads cuts to return the country to a surplus in 2013, but at the cost of shrinking its economy for a sixth straight year.

Reuters reported Monday that the draft budget was to be unveiled later in the day, with provisions that were intended to satisfy the country’s lenders but that will impose additional hardships on its people, who have been demonstrating against additional budget cuts.

Still, this budget draft is expected to contain additional cuts in public sector pay, pensions and welfare benefits; the cuts make up a portion of an austerity program expected to save some 11.5 billion euros ($14.8 billion) over a two-year period. According to the unnamed official, the budget cuts are frontloaded. He was quoted saying, “The draft budget will include 7.8 billion euros in cuts for 2013.”

Before the budget is released, Finance Minister Yiannis Stournaras is set to meet with the troika of inspectors from the European Central Bank (ECB), European Commission (EC) and International Monetary Fund (IMF) for possible final adjustments to the document.

Government officials have said that Athens is shooting for a primary surplus in 2013, before debt service, of 1.1% of GDP; if successful, that will be Greece’s first surplus since 2002. In 2012 the primary deficit is running at 1.5%. However, 2013 will also be the sixth year in a row that Greece’s economy will shrink; under the proposed budget it is expected to contract by 3.8–4%.

Even so, analysts have said that they believe the budget to be optimistic in its goals, between a slowing eurozone economy and slow implementation of other troika requirements.

“The eurozone crisis is still in full throes, so uncertainty and the downward pressure on demand that austerity will have makes even that forecast look optimistic,” Chris Williamson, chief economist at London-based firm Markit, said in the report.


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