Greece to submit contentious budget for 2015

Greece's proposed budget for 2015 has put it at loggerheads again with the "Troika" of international monitors, who are worried the plan will land it with a bigger fiscal gap than forecast.

The coalition government led by Antonis Samaras has promised the budget will include no further austerity measures—on which its bailout is contingent— in an effort to combat the risk of snap national elections next year. The latest polls show that the anti-austerity left-wing opposition party SYRIZA would win an election, if it was held now.


Antonis Samaras Greece
Odd Andersen | AFP | Getty Images

Greek Finance Minister Gikas Hardouvelis will submit the final plan for 2015 to the President of the Parliament at 10 a.m. GMT on Friday. Negotiations in Parliament on the Greek budget for 2015 will then start December 4.

The Troika—the European Commission, International Monetary Fund and European Central Bank—is worried that the budget will land Greece with a much bigger fiscal gap next year than the government says. The disagreement has already delayed the country's review by the Troika and Greece risks missing a December 8 deadline to receive the final instalment of its bailout from Europe, which is worth 144.6 billion euros. This completion of the review would also pave the way for talks on a possible financial backstop for Greece after the European part of its bailout expires at the end of this year.

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"Only once a staff-level agreement has been reached for the conclusion of the review can discussions on the follow-up to the program take place. The full staff mission will return to Athens as soon as the conditions are there," Margaritis Schinas, chief spokesperson of the European Commission told CNBC in an emailed response.

Uncertainty has sent once again sent Greek bond yields soaring.

"The on and off of this uncertainty is what worries investors. The disagreement between the Troika and the government, as well as the Presidential election risk, completely overshadows the short- to mid-term bullish view on the Greek sovereign," David Schnautz, director of interest rate strategy at Commerzbank, told CNBC.

"Greece will need a financial backstop for 2015. Once we clear these key events, things will clear out for Greece. It may get worse before it gets better."

The Greek economy seems to be improving. Greece returned to growth this year after a six-year recession, posting 0.7 percent growth in the third quarter. The European Commission forecasts Greece will grow by a healthy 2.9 percent in 2015.

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Some economists are skeptical however. "I am not sure about the sustainability of this and how much of this growth is really an outcome of local-based productivity versus an injection of European Union subsidised funding," Elena Panaritis, a former World Bank economist and founder of thinktank Thought For Action told CNBC on the phone.

The latest figures showed that 25.9 percent of the Greek workforce was unemployed in August. This is an improvement from the 28 percent highs reached in late 2013, but Greece still boasts the highest unemployment rate in the euro zone.