Greece vows tax cuts, economic growth in 2015

AP News
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Posted: Oct 06, 2014 6:54 AM
Greece vows tax cuts, economic growth in 2015

ATHENS, Greece (AP) — Greece's economy is on track to emerge from a six-year recession this year and grow by 2.9 percent in 2015, though unemployment in the bailed-out country is likely to remain high, the finance ministry said Monday.

The government — facing the threat of an early general election — submitted a draft of the 2015 budget to parliament that sees tax cuts and a return to modest growth of 0.6 percent in 2014, ending the depression that erased roughly a quarter of national output.

"The country is entering a long period of sustained economic growth rates and primary surpluses that will bring growth in employment, reducing unemployment and improving living standards for all citizens," said Deputy Finance Minister Christos Staikouras.

"This is the result of unprecedented sacrifices made by Greek society, households and businesses. These sacrifices must not be wasted."

Prime Minister Antonis Samaras' conservative coalition is hoping to begin easing austerity measures demanded by bailout creditors who provided 240 billion euros ($303 billion) in emergency loans. The bulk of funding from eurozone countries ends this year, while loans from the International Monetary Fund will continue through 2016.

Staikouras said the government is committed to reducing emergency taxes, including a deeply unpopular bailout tax known as the solidarity charge.

But he conceded unemployment was likely to average 27 percent this year before beginning a slow decline.

Megan Greene, chief economist at Manulife Asset Management, said next year's growth target is optimistic as the government needs a strong performance to meet its targets.

"The draft budget is politically motivated — the whole point is for the government to boost its ever-waning popularity," she said.

The government faces a strong challenge from the anti-bailout Syriza opposition party and has called a vote of confidence in parliament this week. He could be forced to call an early general election by February, when the government would need opposition support in parliament to elect a new president.

Leading in opinion polls, Syriza is demanding a renegotiation of the bailout deal and a cut to public debt.

National debt is expected to reach 318.6 billion euros ($402 billion) this year, or 175 percent of GDP, according to the draft budget.

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