22nd Feb 2024

Eurozone ministers face new Greek budget battle

Eurozone finance ministers will face a race against time to resolve the latest disagreement over Greece's spending plans and agree a short-term extension to its bailout program as they gather in Brussels on Monday (8 December).

On Sunday, the Greek parliament backed a budget plan for 2015 which the government hopes will be the start of a gradual move away from austerity, including tax cuts, for the first time since the countrynfaced economic ruin in 2009.

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  • Greek MPs backed spending plans for 2015 on Sunday. (Photo: 2dubstEEr)

The Greek economy has returned to growth this year following six consecutive years of recession which have wiped out more than a quarter of its economic output, and the government has forecast a 2.9 percent growth rate in 2015 alongside a budget deficit of 0.6 percent, although this is regarded as optimistic by the European Commission.

However, its creditors say that the 2015 spending plan has a shortfall of between €2 billion and €3 billion and that further cuts to public spending and pensions will be required. Prime minister Antonis Samaras has vowed not to impose any new tax rises or austerity measures in a bid to keep his fragile coalition government from collapsing.

"There's disagreement on the budget, financing needs, scheduled payment of back taxes, VAT, and unfortunately lots of other questions," Thomas Wieser, the Austrian official who advises the Eurogroup ministers, said in an interview for Greek media Real News on Sunday.

The disagreement threatens to put a spanner in the works of attempts by Athens to ease away from its bailout.

The Greek government is confident that the country can start to return to the markets to finance its debts in 2015 nearly five years after it was forced into the first of two bailout programmes totalling €240 billion.

It had hoped to agree an emergency credit line with its creditors from the EU, International Monetary Fund and the European Central Bank before Christmas, but EU officials have now signalled that this is unlikely to be concluded before January.

Interest rates on ten year Greek bonds currently stand at 7.2 percent, still slightly higher than the level which governments can sustain, but far lower than during the crisis.

Greece is waiting to receive the latest €1.8 billion loan from its creditors.

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