Greece sees another year of recession

ATHENS— Greece’s brutal recession is set to extend into a sixth year in 2013, when the economy will contract by another 3.8 per cent, according to forecasts in the draft budget submitted to Parliament on Monday.

This year’s recession will see the economy shrink around 6.5 per cent, the document estimated. Unemployment is predicted to rise to 24.7 per cent in 2013 from an average 23.5 per cent in 2012.

The budget sees Greece’s government still running at a loss despite spending cuts and tax hikes over the past two years, as it has struggled to meet terms for rescue loans from other eurozone countries and the International Monetary Fund.

The deficit for 2012 is expected to stand at 6.6 per cent of GDP, improving slightly to 4.2 per cent — or € 8 billion ($10.1 billion Cdn) — next year, the document showed.

Greece still has a primary deficit — which excludes interest rates paid on existing debt — of 1.4 per cent of GDP this year, disappointing earlier forecasts for a surplus. That is ex- pected to improve in 2013, when the budget projects a small primary surplus of 1.1 per cent of GDP.

The budget includes about € 7.8 billion worth of austerity measures for next year. They are part of a € 13.5-billion package of spending cuts and tax hikes for 2013 and 2014 that Greece’s international creditors have demanded in exchange for continued payout of the rescue loans that are protecting the country from a messy default.

Of the € 7.8 billion in measures for next year, € 3.8 billion are to come from pension cuts and € 1.1 billion from salary cuts. Other cutbacks include trimming costs for health care, education and defence.

Finance Minister Yannis Stournaras submitted the draft budget to Parliament after talks with debt inspection teams from the IMF, European Central Bank and European Commission — known as the troika.

Negotiations with the troika continue on the details of the two-year austerity package, meaning some of the details in the draft budget could be amended. Parliament usually votes on the budget in December.