Greece recession to enter 6th year, budget shows

(AP) ATHENS, Greece - Greece's brutal recession is set to extend into a sixth year in 2013, when the economy will contract by another 3.8 percent, according to forecasts in the draft budget submitted to Parliament on Monday.

This year's recession will see the economy shrink around 6.5 percent, the document estimated. Unemployment is predicted to rise to 24.7 percent in 2013 from an average 23.5 percent in 2012.

The budget sees Greece's government still running at a loss despite waves of spending cuts and tax hikes over the past two years, as it has struggled to meet the terms for rescue loans from other eurozone countries and the International Monetary Fund.

The deficit for 2012 is expected to stand at 6.6 percent of GDP, improving slightly to 4.2 percent - or 8 billion euro ($10.3 billion) - next year, the document showed.

Greece still has a primary deficit - which excludes interest rates paid on existing debt - of 1.4 percent of GDP this year, disappointing earlier forecasts for a surplus. That is expected to improve in 2013, when the budget projects a small primary surplus of 1.1 percent of GDP.

The budget includes about 7.8 billion euro worth of austerity measures for next year. They are part of a 13.5 billion euro package of spending cuts and tax hikes for 2013 and 2014 that Greece's international creditors have demanded in exchange for continued payout of the rescue loans that are protecting the country from a messy default.

Of the 7.8 billion euro in measures for next year, 3.8 billion euro are to come from pension cuts and 1.1 billion euro from salary cuts. Other cutbacks include trimming costs for healthcare, education and defense.

Finance Minister Yannis Stournaras submitted the draft budget to Parliament after talks with debt inspection teams from the IMF, European Central Bank and European Commission - known as the troika.

Negotiations with the troika continue on the details of the two-year austerity package, meaning some of the details in the draft budget could be amended. Parliament usually votes on the budget in December.

As Stournaras met with the troika, a group of about 30 protesters, mainly from the small right-wing Independent Greeks party, gathered outside the finance ministry. "Bastards, the gallows are coming," they chanted.

Austerity talks involving the troika and three political parties backing Greece's four-month-old coalition government have dragged on for weeks, with disagreement over how the cuts will affect low-income Greeks suffering under recession.

Conservative Prime Minister Antonis Samaras, in a weekend newspaper interview, argued the country was showing its rescue lenders that it is serious about its reforms.

"Our partners can see that changes are now happening," Samaras told the Sunday To Vima newspaper. "The first thing we must do is win back our damaged credibility ... Without credibility, you can't negotiate."