* Greek budget projects 3.8 pct economic slump
* Athens to aim for 1.1 pct of GDP primary surplus
* Will frontload austerity measures in 2013
* Troika officials heckled
By Lefteris Papadimas and Dina Kyriakidou
ATHENS, Oct 1 Greece will bring forward painful
budget cuts to end a decade of primary deficits while grappling
with a sixth year of recession, according to a 2013 budget draft
aimed at satisfying international lenders.
The government unveiled a tough austerity budget after
Finance Minister Yannis Stournaras met the so-called "troika" of
International Monetary Fund, European Commission and European
Central Bank inspectors, whose approval is vital to unlock the
next slice of aid, urgently needed to avoid bankruptcy.
Greece will aim for a primary surplus before debt service of
1.1 percent of GDP next year, the first positive balance since
2002, after a 1.5 percent deficit in 2012. But the economy will
continue to shrink for a sixth year by 3.8 percent.
Economic output will have declined by a quarter since 2008
in a vicious spiral of austerity and recession, with the most
heavily indebted euro zone nation repeatedly missing targets set
under its EU/IMF bailouts and at risk of being forced out of the
single currency area.
Analysts said even the recession scenario set out in the
budget appeared optimistic, given Greece's slow reform efforts
and a weakening euro zone economy.
"Chances are the budget targets will be missed because of
the deeper recession which the cuts will bring and the inability
to meet privatisation targets," said Xenofon Damalas, head of
investment services at Marfin Egnatia Bank.
The general government deficit, including debt servicing
costs, will come to 4.2 percent of GDP next year from 6.6
percent in 2012, while unemployment will rise to 24.7 pct.
The draft gave no target for privatisation revenues. In a
sign of the daunting scale of Greece's problems, public debt is
projected to reach 179.3 percent of GDP next year despite a
major write-down of debt owed to private investors this year.
The budget will make more cuts to public sector pay,
pensions and welfare benefits as part of an 11.5 billion euro
($14.8 billion) austerity package of savings spread out over the
next two years.
Austerity-weary Greeks have taken to the streets in often
violent protests against the waves of salary and pension cuts
that have driven many to the edge. Prime Minister Antonis
Samaras, who will also meet the troika chiefs later on Monday,
has vowed this is the last round of cuts.
Dozens of protesters waving Greek flags and shouting "out
with the troika" jeered troika officials as they entered the
finance ministry on Monday.
At stake is a 31.5 billion euro installment from a 130
billion euro second bailout keeping Greece afloat. Lenders have
made clear no money will be disbursed without credible measures.
But two German magazines reported at the weekend that Greece
would receive the next payment despite missing its targets
because euro zone governments were too afraid of the "domino
effect" if Athens were forced out of the currency area.
Two junior leftist parties in Samaras's coalition government
have resisted the cuts and a handful of deputies have warned
they will vote against the bill in parliament, which will debate
the draft and vote on the final version in mid-December.
"We are trying to rescue whatever we can even at the
eleventh hour," Andreas Papadopoulos, spokesman for the small,
co-ruling Democratic Left party, told Reuters, signaling the
battle in parliament will be intense.
Analysts expect the coalition, which holds 178 out of 300
parliament seats, to pass the bill despite any defections. The
final budget is expected to differ from the draft.
A government official, who spoke to Reuters on condition of
anonymity, said Athens will frontload a big chunk of the new
spending cuts under negotiation with the troika.
"The draft budget will include 7.8 billion euros in cuts for
2013," the official said.
Belt-tightening has taken a toll on economic activity,
suppressing domestic demand and driving the jobless rate to a
record of almost 25 percent.
Returning to a primary surplus will hinge on how faithfully
the government sticks to the unpopular measures, after years of
missed targets that have angered its partners.
"In terms of the government meeting the targets, it will be
very difficult," said Ben May, European economist at
London-based firm Capital Economics, adding that tensions within
the coalition could derail efforts especially if the troika asks
for additional measures down the road.
"We are at the stage where all the easy options have
disappeared," he said.