Greece’s finance minister has promised to stick with his plan for the country to post a primary surplus in 2012, hours before he was to hold an emergency teleconference with debt inspectors.
Evangelos Venizelos’ target of generating more revenues next year than the country spends, before paying off interest on debts, comes despite the ongoing recession in the crisis-hit country. Greece’s economy is expected to contract by about 5.5 per cent this year.
Speaking at a conference south of Athens on Monday, Venizelos said the 2012 target was vital for Greece to avoid international “blackmail and humiliation.”
“We are living though a recession that is unprecedented in recent decades. The recession … will reach 5.5 per cent in (2011). It is the third straight year of recession and it will continue for a fourth, though significantly reduced,” Venizelos said.
He said Greece planned to record a 3 billion euro ($A4.01 billion) primary surplus in 2012. That compares with a primary deficit of 24 billion euros ($A32.05 billion) in 2009.
“It is not rational or responsible to continue to increase the debt when our partners are helping us deal with the national debt,” Venizelos said.
The Socialist government still must live up to its commitment to lower the 2011 budget deficit goal to 7.6 per cent of gross domestic product.
When it became obvious earlier this month that there was a more than 2 billion euro ($A2.67 billion) shortfall in the budget, Greece’s creditors threatened to withhold the sixth instalment of a 110 billion euro ($A146.88 billion) rescue package agreed upon in May 2010.
Without the instalment, worth 8 billion euros ($A10.68 billion), Greece faces defaulting on its debts by mid-October.
A review by officials from the International Monetary Fund (IMF), the European Central Bank and the European Commission, collectively known as the ‘troika,’ was suspended earlier this month amid talk of missed targets.
The troika heads had been due to return to the country this week but have stayed away and will hold a crucial teleconference with Venizelos later on Monday instead.
Prime Minister George Papandreou, who cancelled a scheduled trip to Washington and New York on Saturday to remain in Athens for a “critical week,” has called a government meeting for after the call.
Despite record unemployment, Greeks have been slapped with emergency taxes this autumn, further straining household budgets.
Venizelos acknowledged that the new levies were “deeply unfair” but said the country had little.
IMF representative Bob Traa urged the government to speed up structural reforms and avoid further emergency taxes.
“I have compared Greece to a Mercedes that can go 120 kilometres per hour but is only going 40 because it has so much sludge in the engine,” Traa told the conference.
He said Greece needed to speed up its reforms in tax collection and reducing the size of the overmanned public sector.
Income tax and sales tax rates should not be reduced until those reforms succeed, he argued.
“The authorities clearly need to guard against the program becoming imbalanced between revenues and spending,” he said. “In our view, it should not result in higher and higher taxes on a limited tax base.”
