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Greece expects deeper recession next year

Greece has unveiled a final budget for 2013 that assumes a deeper recession and higher deficit than forecast only a month ago as it prepares to seek international creditors' approval for a new bailout programme.

The economy is set to shrink by 4.5 per cent next year compared with 3.8 per cent projected in the draft budget unveiled on October 1, according to draft legislation presented to parliament on Wednesday.

Public debt is estimated to soar to 189.1 per cent of gross domestic product, compared with 179.3 per cent, underscoring mounting concern among international lenders about its medium-term sustainability.

Next year's general government deficit would reach 5.2 per cent of GDP, up from an earlier forecast of 4.2 per cent, despite further spending cuts targeting healthcare, pensions and public sector salaries.

Spending cuts in 2013 would reach an unprecedented €9.2bn following three years of missed targets under Greece's first adjustment programme.

But Greece is still projected to achieve a primary budget surplus - before making interest payments on debt - amounting to 0.4 per cent of GDP.

Finance ministry officials worked feverishly to complete the final version of the budget ahead of Wednesday's teleconference by the eurogroup of finance ministers from the eurozone countries to assess Greek progress with fiscal and structural reforms.

"The upwardly revised debt figure is not exactly a surprise but it's going to stir debate on Greece's future funding," one Athens official said.

The EU and IMF has ratcheted up the pressure on Greece by insisting that its parliament should approve the 2013 budget together with a medium-term package of structural reforms before agreeing to release a €31.5bn loan tranche delayed since June.

Parliament is due to vote on both pieces of legislation on November 11, the day before the eurogroup meets in Luxembourg to make a decision on the loan disbursement.