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In welcome change, Greece projects growth in economy in 2014

October 07, 2013|By Anthee Carassava
  • Deputy Finance Minister Christos Staikouras holds a news conference in Athens. He said that the Greek economy is projected to expand 0.6% after a 4% contraction this year.
Deputy Finance Minister Christos Staikouras holds a news conference in… (Petros Giannakouris / Associated…)

ATHENS -- In the strongest sign yet of economic recovery, Greece’s ruling coalition on Monday unveiled a draft budget for 2014 that foresees growth in the country's debt-crippled economy, which is emerging from the doldrums after six years of painful austerity.

Initially hit by global market turmoil in 2008, Greece has been at the center of the European Union’s debt woes since late 2009, when the government exposed a crushing debt built up during years of dodgy state bookkeeping.

Sovereign European lenders and the International Monetary Fund stepped in, pledging more than 245 billion euros (about $330 billion at current exchange rates) to keep the laggard economy from defaulting and the euro, Europe’s common currency, safe.

In return, though, Athens has had to impose bitter budget cuts and umpteen tax hikes -- measures that precipitated popular protests and political turbulence as incomes fell by at least 25%, hundreds of thousands of small businesses went bankrupt and unemployment shot up to 28%, putting Greece at the center of global debate over the merits of austerity.

“From this year, the sacrifices are starting to take hold, creating the first signs of the country’s exit from the crisis,” Deputy Finance Minister Christos Staikouras told reporters. “With the state budget for 2014, these first significant achievements are being capitalized on, consolidating the stabilization of public finances and improving conditions for the gradual return to a growth path.”

According to the budget, Greece’s crisis-ravaged economy will grow 0.6% next year after contracting an additional 4% in 2013. Unemployment was also predicted to improve, with the jobless rate dropping to 26%, although still among the highest in the 17-nation Eurozone.

Staikouras said the economy would post a small but promising $640-million primary surplus this year, climbing to $3.8 billion in 2014 and allowing Athens to service its running expenses -- not including interest on debt loans -- for the first time in a decade.

Market analysts greeted the upbeat forecasts, however encouraging, with guarded optimism. What’s more, the reform-minded Staikouras warned that the government would not let up on austerity.

“These positive developments must add impetus to our efforts and not allow any relaxation, because Greece’s chronic structural fiscal problems ... have not been fully addressed,” he said.

Fears remain that the bailout program may fall short of Greece’s financing needs by about $13.5 billion in 2014-15.

A troika of international lenders from the EU and the IMF returns to Athens this month to review the draft budget with the Greek government before a final version is put to a vote in Parliament this year.

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Carassava is a special correspondent.

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