Greece will unveil its draft 2014 budget plan which is expected to forecast an end to six years of recession.
The draft will include key forecasts on unemployment, public debt and the size of the primary surplus Athens will aim for to show it is turning the corner. The government has said any further fiscal belt-tightening will not bring cuts in wages and pensions and that savings will be generated from structural measures.
If even Greece has passed the worst then maybe the euro zone crisis really is on the wane. The FT reports that billionaire John Paulson and a number of other U.S. hedge funds are investing aggressively in Greece’s banking sector, expecting it to get off its knees – an interesting straw in the wind.
However, some form of further restructuring of Greek debts – now largely held by euro zone governments and the European Central Bank – is still firmly on the cards at some point if the country is ever to get back on its feet. Its debt is due to peak at around 175 percent of GDP this year.
Berlin has ruled out “haircuts” on Greek bonds. Instead extension of repayment terms and cuts in interest rates on bailout loans are more likely.
The trigger for such a deal will be Athens’ ability to deliver a primary surplus – a surplus of tax revenue over public spending once debt interest payments are taken out of the equation – next year. In fact, sources told us last month that Greece and its lenders are close to agreeing that Athens will achieve a small primary budget surplus this year.