Tax cuts, growth seen in 2015 bud­get

Financial Mirror (Cyprus) - - FRONT PAGE -

Greece’s econ­omy is on track to emerge from a six-year re­ces­sion this year and grow by 2.9% in 2015, though un­em­ploy­ment in the bailed-out coun­try is likely to re­main high, the fi­nance min­istry said Mon­day.

The gov­ern­ment - fac­ing the threat of an early gen­eral elec­tion - sub­mit­ted a draft of the 2015 bud­get to par­lia­ment that sees tax cuts and a re­turn to mod­est growth of 0.6% in 2014, end­ing the de­pres­sion that erased roughly a quar­ter of na­tional out­put, ac­cord­ing to the As­so­ci­ated Press.

“The coun­try is en­ter­ing a long pe­riod of sus­tained eco­nomic growth rates and pri­mary sur­pluses that will bring growth in em­ploy­ment, re­duc­ing un­em­ploy­ment and im­prov­ing liv­ing stan­dards for all cit­i­zens,” Deputy Fi­nance Min­is­ter Chris­tos Staik­ouras was quoted as say­ing.

“This is the re­sult of un­prece­dented sac­ri­fices made by Greek so­ci­ety, house­holds and busi­nesses. Th­ese sac­ri­fices must not be wasted.”

Prime Min­is­ter An­to­nis Sa­ma­ras’ frag­ile coali­tion is hop­ing to be­gin eas­ing aus­ter­ity mea­sures de­manded by bailout cred­i­tors who pro­vided 240 bln euros in emer­gency loans.

The bulk of fund­ing from eu­ro­zone coun­tries ends this year, while IMF loans will con­tinue to 2016 as na­tional debt is seen reach­ing 318.6 bln euros this year, or 175% of GDP, ac­cord­ing to the draft bud­get.

Staik­ouras said the gov­ern­ment is com­mit­ted to re­duc­ing emer­gency taxes, in­clud­ing a deeply un­pop­u­lar bailout tax known as the sol­i­dar­ity charge.

But he con­ceded un­em­ploy­ment was likely to av­er­age 27% this year be­fore be­gin­ning a slow de­cline.

Megan Greene, chief economist at Man­ulife As­set Man­age­ment, said next year’s growth tar­get is op­ti­mistic as the gov­ern­ment needs a strong per­for­mance to meet its tar­gets.

“The draft bud­get is po­lit­i­cally mo­ti­vated - the whole point is for the gov­ern­ment to boost its ever-wan­ing pop­u­lar­ity,” she said.

The gov­ern­ment faces a strong chal­lenge from the an­tibailout Syriza op­po­si­tion party and has called a vote of con­fi­dence in par­lia­ment this week. Sa­ma­ras could be forced to call an early gen­eral elec­tion by Fe­bru­ary, when the gov­ern­ment would need op­po­si­tion support in par­lia­ment to elect a new pres­i­dent.

The pledges to ease up on aus­ter­ity come as an in­creas­ing num­ber of coun­tries, in­clud­ing France and Italy, chal­lenge the strict fis­cal dis­ci­pline cham­pi­oned by Ger­many, the New York Times re­ported.

Greece’s bud­get still re­quires the ap­proval of the troika, whose rep­re­sen­ta­tives have been in Athens since last week in­spect­ing the gov­ern­ment’s progress in en­forc­ing eco­nomic over­hauls, the news­pa­per said.

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