World Business

Greece upbeat on bid to exit from crisis

(Agencies)
Updated: 2010-07-06 15:03
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ATHENS, Greece - Debt-hobbled Greece may see a slightly milder than expected recession this year and aims to issue bonds again on international markets in 2011, the finance minister said Monday.

George Papaconstantinou said efforts to slash the gaping budget deficit from 13.6 in 2009 to 8.1 percent of gross domestic product in 2010 remain on track.

"We believe we will attain and perhaps exceed the target of 8.1 percent at the end of 2010," Papaconstantinou said. Greece is committed to bringing the deficit to under 3 percent of annual output in 2014.

Papaconstantinou said a below-target increase in revenues should be offset in part by sales and tobacco tax increases, as well as property tax payments.

Greece narrowly avoided defaulting on its loans in May, after being pledged 110 billion euros ($137.38 billion) in bailout loans from the European Union and International Monetary Fund.

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In return, the government is slashing spending and pushing through sweeping pension and labor reforms -- angering labor unions, which are planning another general strike Thursday.

Papaconstantinou said initial forecasts of the recession-bound economy shrinking by 4 percent of GDP this year now appear "excessively pessimistic."

"The drop was 2.5 percent in the first quarter, and our first indications for the second quarter show the figure at around 3 percent," he said. "Based on that, and knowing that there may be a worsening in the third quarter as many of the (austerity) measures kick in, we are in a position to believe that the year will end somewhat better."

The government expects the economy to start expanding again in 2012. But analysts fear protracted recession, combined with harsh austerity measures, could endanger the center-left government's ambitious deficit-cutting program.

Papaconstantinou said a gradual improvement of public finances could allow Greece to return to bond markets "some time in 2011."

A second, euro9 billion ($11.28 billion) installment of the EU-IMF rescue loans is expected by mid-September, he said, with another 10 installments to follow.