NEWS,01.10.2012

Greek 2013 budget sees 6th year of recession

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 instalment of aid, urgently needed to avoid bankruptcy.Greece will aim for a primary surplus before debt servicing of 1.1% of GDP next year, the first positive balance since 2002, after a 1.5% deficit in 2012. But the economy will shrink for a sixth year, by 3.8%.There was no immediate comment from either EU authorities or the IMF on the budget, but Greek Finance Ministry officials said the troika still objected to some of the measures.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 bloc.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% of GDP next year from 6.6% in 2012, while unemployment will rise to 24.7%.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% of GDP next year despite a major writedown of debt owed to private investors this year.Painful cuts The budget will make more cuts to public sector pay, pensions and welfare benefits as part of an 11.5 billion euro austerity package of savings spread out over the next two years."We must hold on tight to the helm to make the difficult turn," Stournaras said. "It's the only way for the Greek economy to return to the righteous cycle of fiscal stability and growth."Labour unions were quick to respond, vowing new strikes this month after a crippling walkout marked by clashes last week."We don't have any other option. We can't just sit around doing nothing," said Nikos Kioutsoukis, general secretary of the largest private sector union GSEE.Austerity-weary Greeks have taken to the streets in often violent protests against waves of salary and pension cuts that have driven many to the edge.Prime Minister Antonis Samaras, who has vowed this is the last round of cuts, also met the troika chiefs later on Monday to convince them to lift their last objections, but there appeared to be little progress."There are discussions on the measures. The troika wants clarifications," Stournaras told reporters after the meeting. Officials said inspectors doubt about 2 billion worth of measures would actually be delivered.Dozens of protesters waving Greek flags and shouting "out with the troika" jeered the international creditors' envoys as they entered the finance ministry on Monday.At stake is a 31.5 billion euro instalment from a 130 billion euro second bailout keeping Greece afloat. Lenders have made clear no money will be disbursed without credible measures.However, two German magazines reported on Saturday that Athens would receive its next aid tranche despite budget shortfalls and slow progress on reforms because the euro zone does not want any country to leave the common currency.Lenders are coming to terms with the fact Greece will need more time, more funding or a restructuring of official debt - that owed to European governments - to survive. Sources have told the IMF would prefer bondholders to take another haircut, but EU governments, which would incur most of the losses, would rather give Athens more time."Those who accept Greece's optimistic predictions want to gain time to resolve the debt crisis overall," Damalas said. "But talk has already begun that the austerity measures are not enough and a new, official haircut will be needed, which explains the tension between the IMF and the EU."

Italy fights tax evasion on YouTube

Italy's tax agency on Monday launched its own channel on YouTube to tell Italians how to pay their taxes, as the government pursues a sweeping crackdown against evasion aimed at boosting public finances. Videos lasting one or two minutes inform viewers fed up with bureaucracy in clear and simple language on questions like how to obtain a card for health services, how to register a house rental contract or how to pay taxes online.Eight videos were visible on the website  on Monday but the tax agency said that new videos would be posted soon.The agency specified that the clips had been produced at no extra cost.Italy's tax authorities have long been criticised for using overly complex bureaucratic language and methods, making it hard to fulfil all requirements.Since coming to power last year, Prime Minister Mario Monti has stressed Italians must see paying taxes as a sign of civility. Tax evasion is estimated at between €120bn and €150bn ($150bn - $194bn) a year.With high-profile raids on luxury resorts and bars, tax authorities managed to recover €12.7bn in unpaid taxes last year - a 15.5 percentage point increase from 2010 - and are intending to claw back even more this year.

New finance minister for Japan

Japanese Prime Minister Yoshihiko Noda appointed as finance minister on Monday a veteran lawmaker expected to follow his line on budget reform and currency intervention in a new cabinet unveiled ahead of an election due in months.Koriki Jojima, 65, who served as the parliamentary affairs chief for the ruling Democratic Party of Japan (DPJ), will take charge of the world's third largest economy as it teeters on the brink of recession, hurt by a global slowdown and a strong yen.Noda, who took office in September 2011 as the Democrats' third prime minister in as many years, had changed his cabinet line-up twice before. The third reshuffle is seen as a last-ditch effort to boost the Democrats' sagging ratings.Analysts said neither Jojima nor the other nine new ministers would have much impact on government policy, with the shake-up mainly designed to give those with greatest voter appeal more prominent roles within the party or cabinet.Jojima replaced Jun Azumi, 50, an eloquent and experienced campaigner who once worked as a presenter at public broadcaster NHK and who took over a senior party post.Similarly, photogenic Goshi Hosono, 41, left his post as environment minister to become party policy chief.Jojima is likely to toe Noda's line on the need for fiscal reforms given he was instrumental in securing a political deal on the prime minister's plan to double the sales tax to 10% by October 2015. "Noda clearly eyes elections in reshuffling the cabinet and party line-ups this time," said political commentator Harumi Arima.Little is known about Jojima's views on monetary and currency policies, but he is expected to stick with the government line on the need to work with the central bank to beat deflation and to act firmly against excessive yen gains. "I doubt if Noda took into account the need to put the right person in the right place," said Kyohei Morita, chief Japan economist at Barclays Capital. "The fact that he can reshuffle the cabinet so many times in a year indicates that bureaucrats, not politicians, guide policies including currency intervention.""As such, I see no change in currency policy whereby authorities give verbal warning when the dollar falls below ¥78 and stand ready to intervene in case of excessive gains," he said, adding the new minister hardly grabbed market attention.Opposition seen strongNoda retained his foreign and defence ministers in the reshuffle that comes amid heightened tension with China over a long-simmering row over a chain of East China Sea islands administered by Japan but also claimed by China and Taiwan.Noda told reporters that Japan had no plan to bring the dispute to the International Court of Justice, and that from Japan's perspective there was no question of its sovereignty over the islands. Japan has taken a separate dispute with South Korea to the court.Some commentators took Noda's appointment as education minister of Makiko Tanaka, a former foreign minister and the daughter of Kakuei Tanaka, who normalised diplomatic relations with China four decades ago, as a move to improve ties with Beijing.Noda told reporters the sole purpose of the shake-up was to improve the functioning of the cabinet.Opinion polls show the main opposition Liberal Democratic Party, ousted in 2009 after half a century of almost non-stop rule, will likely come first in the election, meaning Jojima's time in office could be short.Noda, 55, promised in August to call general elections "soon" in return for backing on his contentious sales tax plan. But the former finance minister remains coy on the timing of the vote.