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Greek recession to get worse in 2013

Wednesday, October 31 14:08:02

The Greek government today predicted worse-than-expected recession in 2013 and downgraded a rare positive note in its budget, highlighting the toll of repeated rounds of austerity.

The government more than halved its forecast for a budget surplus before debt interest payments are taken into account, dimming one of the few bright spots in a final 2013 budget bill.

Nearly bankrupt and reliant on aid from European partners and the IMF to survive, the bill showed steadily worsening economic prospects are wiping out much of the boost from spending cuts demanded by lenders.

Chaos marked the budget's release as Greece's two biggest labour unions called a 48-hour anti-austerity strike for Nov. 6-7. The deputy finance minister cancelled a presentation due to a journalists' strike and Greek bondholders angry at losses they suffered hurled eggs at the finance ministry's budget division.

The budget showed Greece targeting a primary surplus of 0.4 percent of gross domestic product in 2013, below the previous target of 1.1 percent. That at least shows the country is on- track for a primary surplus for the first time since 2002.

Greece now expects the economy to contract 4.5 percent next year - its sixth year of recession - up from the previous forecast of 3.8 percent. Five years of recession have already shrunk the economy by a fifth and left a quarter of Greeks jobless.

Giada Giani, an analyst with Citigroup in London, said the 189.1 percent debt to GDP ratio for 2013, 10 percentage points higher than predicted in the draft budget, was a key pointer to what lies ahead.

"The pressure by the IMF on European policymakers for another round of debt restructuring, possibly including the official sector, is likely to increase," Giani said.

"The key question is how to make the Greek debt sustainable again and it seems there's no way of doing it without doing another round of restructuring." (C ) Reuters