Tough new budget on the way

The 2012 budget will be tabled in Parliament on November 14 and 15, according to sources, and is expected to be even more demanding than the original draft owing to this year?s lagging revenues.

However, the revenues deficit could be balanced out by the reduction in interest rate payments the country must make if the October 27 agreement is ratified and applied, which would spare Greeks from any new measures.

The Finance Ministry?s original plan was to table the budget next week but several ministries are yet to send in their 2012 financial figures, including those of Labor, Interior and Health.

The Finance Ministry intends to have the country display a primary surplus next year, but the unforeseeable factor of recession will determine to a significant extent whether the government will manage to execute the budget in 2012 without any additional charges for taxpayers.

For 2012, the Finance Ministry is hoping to reduce the deficit to 14.6 billion euros, or 6.8 percent of the country?s gross domestic product. In total for next year revenues and expenditure should provide an extra 11 billion euros.

That will come through lowering the income tax-exemption ceiling from 12,000 to 5,000 euros, ending tax discounts for receipt collection, cutting other tax exemptions, additional property charges, the rise in the special consumption tax on heating oil, the new salary system in the public sector, cuts in salaries and other allowances to medical staff and cuts to grants for social security funds.

The government is also preparing a plan for saving some 550 million euros from state corporations through cutting expenditure by 15 percent and increasing revenues by 10 percent.

Furthermore, Greece?s international creditors have given the government a three-month deadline to present a plan to save 8.5 billion euros for 2013 and 2014.

This should be done through cutting expenses, but not across the board; it must come from structural reforms, which the government will need time to identify and impose.