First signs of end to crippling debt crisis, says finance minister of Greek economy that has shrunk by a quarter since 2007
Greece will emerge from six years of recession next year, a draft budget forecast on Monday, signalling the country is past the worst of a crippling debt crisis that nearly broke Europe's single currency.
Twice bailed-out Athens also confirmed it would post a budget surplus before interest payments this year for the first time in over a decade, and its battered economy won a vote of confidence from billionaire US investor John Paulson.
The positive outlook marks a sharp reversal in fortunes for a nation that had become Europe's problem child, lurching from one crisis to the next as it tottered close to bankruptcy and exasperated its international partners with broken promises.
Analysts cautioned that despite the signs of economic stabilisation Greece remained hooked on aid and further debt relief was inevitable to bring down a level of indebtedness set to top 175% of gross domestic product this year.
The Greek economy, which has shrunk by about a quarter since its peak in 2007 and thrown more than one in four out of work, will grow by a modest 0.6% next year thanks to a rebound in investment and exports including tourism, the budget predicted.
In a further boost, Athens forecast a primary budget surplus of 1.6% of national output next year after posting a small surplus of €340m this year. Attaining a primary surplus – which excludes debt servicing costs – makes Athens eligible for further debt relief from its European Union and International Monetary Fund lenders.
"In the last three years Greece found itself in a painful recession with an unprecedented level of unemployment," Deputy Finance Minister Christos Staikouras said as he unveiled the 2014 budget. "Since this year, the sacrifices have begun to yield fruit, giving the first signs of an exit from the crisis."
Athens will ask its creditors to honour their commitment to provide debt relief, and hopes it can return to the bond markets in the second half of next year, Staikouras said.
Greece is hoping for an extension of maturities and lower interest rates on bailout loans after its partners ruled out an outright write-off of debt. It also expects to receive a third bailout of about 10 billion euros to get through next year.
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