* Budget draft sees deficit of 5.4 pct/GDP if debt swap goes
* Deficit to hit 6.7 pct if swap does not happen
* Envisions swapping debt for EUR 70 bln in new bonds, EUR
30 bln in cash
* Economy seen shrinking 2.8 pct in 2012, fifth year of
ATHENS, Nov 18 A planned debt swap with
private bondholders can reduce Greece's 2012 budget deficit by
more than a third from this year's level to 5.4 percent of GDP
if it goes ahead as planned, a final budget draft showed on
Under the guidance of its international bailout lenders, the
European Union and the International Monetary Fund, Athens is
struggling to rein in its public debt and fiscal deficit to
avoid bankruptcy and a possible exit from the euro.
Part of that effort is a plan to cut Greece's privately held
debt load in half, which the budget draft said would entail
swapping 200 billion euros ($270 billion) in existing bonds with
70 billion euros in new paper and a 30 billion euro payment in
cash to creditors who take part.
Excluding the effects of the debt swap, the budget draft
predicted the country's fiscal gap would fall to 6.7 percent of
gross domestic product next year, from 9 percent in 2011.
"After a historical course of steady increase of public
debt, now this will be reversed," Finance Minister Evangelos
Venizelos told lawmakers as he presented it to parliament.
"Now the course is that of reducing public debt and removing
the burden from Greeks' backs."
Lawmakers will begin debating the budget draft at committee
level next week and will then be approved by a plenary session
of parliament at a date yet to be set.
Parliament approved a new national unity government led by
technocrat Prime Minister Lucas Papademos in a vote of
confidence two days ago. Venizelos kept the portfolio he had
held in the previous Socialist administration.
The new cabinet is aiming for a primary budget surplus --
with revenues exceeding spending when debt maintenance costs are
excluded -- next year so it can start chipping away at its debt
load which, without the swap deal, is estimated to reach almost
200 percent of gross domestic product next year.
To do that, Papademos's government must tackle rampant tax
evasion, start selling off billions of euros worth of
inefficient public companies and lay off public workers - all
reforms planned but never executed by its Socialist predecessor.
The budget also forecast that a recession expected to enter
a fifth year in 2012 would slow to an economic contraction of
2.8 percent, versus an expected 5.5 percent this year.