Greece submits 2015 budget with troika talks still at impasse

Greece submitted its 2015 budget to parliament without prior sign-off from its international creditors as talks with them remained stalled.

The plan sees the government posting a budget surplus before interest payments of 3 percent of gross domestic product next year, or 5.6 billion euros ($7 billion) compared with a forecast of 2.9 percent of GDP in an earlier draft of the budget last month, Alternate Finance Minister Christos Staikouras told reporters in Athens Friday. Hours earlier, talks between the government and officials representing the European Commission, European Central Bank and International Monetary Fund, known as the troika, ended without an agreement over those forecasts.

“The risk of a complete breakdown is quite high,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “This is a pre-electoral message. There’s a competition going on between the government and SYRIZA over who can unshackle Greece from the bailout accord the quickest.”

Prime Minister Antonis Samaras’s government and its euro- area and IMF creditors are deadlocked over a final round of measures required to release the last tranche of the country’s bailout. The government, trailing in polls to the opposition SYRIZA party, with a constitutional impasse over a new president likely to trigger snap elections early next year, is pushing to exit its unpopular bailout program at the end of 2014.

Rising yields

Uncertainty over what happens once the country’s euro-area rescue package expires at the end of the year has triggered a spike in Greek borrowing costs, with yields on 10-year bonds rising from their post-crisis low of 5.57 percent in September. Yields were four basis points lower at 8.22 percent as of 1:48 p.m. in Athens Friday.

The government is resisting pressure from the troika for additional budget savings in 2015 of as much as 2.5 billion euros, according to two people familiar with the negotiations. Greek officials and the troika held a conference call that began last night and ended in the early hours of this morning after failing to yield an agreement between the sides.

Greece and the troika are working to reach an agreement and their positions are converging, Finance Minister Gikas Hardouvelis told reporters in parliament Friday, after submitting the budget. While the troika is pressuring Greece over the budget numbers, their calculations are mistaken, he said.

European Commission spokesman Margaritis Schinas told reporters in Brussels that the discussions will continue Friday.

The forecasts for GDP growth in the budget are unchanged from last month’s draft at 2.9 percent in 2015 after a 0.6 percent expansion this year. The overall budget deficit is seen narrowing to 0.2 percent of GDP in 2015 from 1.3 percent this year. Public debt will drop to 317 billion euros in 2015, or 171 percent of GDP, from 178 percent of GDP this year, according to the budget. [Bloomberg]

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