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Parliament approves 2014 budget in Greece

Asprovalta, Greece
Oliver Bunic | Getty Images
Asprovalta, Greece

Greece's Parliament early on Sunday approved a budget for 2014 which predicts a timid return to growth after six years of recession despite the reluctance of many government lawmakers to impose further cutbacks on a country reeling from economic hardship.

After several days of debate, the budget, which outlines 3.1 billion euros ($4.2 billion) in state spending cuts and 2.5 billion euros in additional tax revenue, passed through the 300-seat Parliament with 153 votes to 142, securing the backing of all coalition members of Parliament except one who was absent.

The result had been widely expected as more contentious legislation, chiefly regarding heavier property taxes, is not due for debate until next week.

Some coalition members of Parliament who backed the budget, essentially to keep the government standing amid rising political tensions, have suggested they may break ranks over the new property tax which combines several existing levies and increases taxes on large city properties and on farmers.

After three years of tax increases and cuts to salaries and pensions — imposed in return for billions of euros in rescue aid from Greece's so-called troika of international creditors — tolerance for austerity is wearing thin among Greeks who have seen their living standards slashed.

But government officials insist there is an end in sight to the pain, presenting a budget that sees the beleaguered economy growing by 0.6 percent in 2014 following a 4 percent contraction this year and unemployment edging down to 24.5 percent from 25.5 percent this year.

Addressing Parliament before the vote, Prime Minister Antonis Samaras insisted that the country was turning a corner. He noted that the budget foresees a primary surplus – a surplus excluding debt payments – of 812 million euros this year and 2.95 billion euros in 2014.

"For the first time in years we will not need to borrow to cover our needs," he said. "Greece did not go bankrupt and this is a success," Mr. Samaras said, describing the gradual economic turnaround as "a real revolution."

Earlier the leader of the leftist opposition Syriza, Alexis Tsipras, said the budget was a continuation of the government's "disastrous" economic policies which had created a "humanitarian crisis" in Greece and accused the country's foreign creditors of seeking to turn the country into a debt colony. Mr. Tsipras, whose party is neck-and-neck with Mr. Samaras' in opinion polls, said a Syriza government would seek a reduction of the country's debt, "get rid of the troika" and "change Greece."

Any argument about the Greek budget is rather theoretical as it is likely to be revised, lacking the approval of the European Commission, European Central Bank and the International Monetary Fund which have extended Greece two foreign bailouts worth 240 billion euros since 2010.

The blueprint is also regarded as overly optimistic by economists with the Organization for Economic Cooperation and Development who predicted last month that the Greek economy would not grow next year but shrink, by 0.4 percent.

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Troika envoys left Athens last month when negotiations stalled over the economic reforms necessary to unlock further rescue funding and amid a dispute over the size of a looming fiscal gap for next year.

A spokesman for the European Commission, Simon O'Connor, said late on Saturday that senior auditors would return to Athens in January "after the authorities have made further progress in implementation" of economic reforms, noting that lower-level "technical discussions" would continue next week.

Apart from the budget gap, which the troika estimates at around 1.5 billion euros, key points of contention are a delayed program of layoffs in the public sector, a lagging privatization drive, a faltering crackdown on widespread tax evasion and restrictions on home foreclosures which the troika is pushing the government to lift but which the authorities are resisting as a politically and socially risky move.

European leaders including Chancellor Angela Merkel of Germany and Jose Manuel Barroso, president of the European Commission, have in recent weeks praised the "impressive" progress made by Athens in repairing its battered economy and have pressed the authorities to persevere, despite the fragile political and social situation.

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