Greece's new budget for 2011 was tabled in parliament on Thursday, envisaging a reduction of the deficit to 7.4 percent next year from 9.4 percent in 2010, which will result from cutbacks in expenditures and an increase in revenues totaling 14.3 billion euros.
The 2011 state budget was tabled in parliament at noon on Thursday by Finance Minister George Papaconstantinou after it was approved at a Cabinet meeting.
"The government is not changing the target for the size of the deficit in 2011 and is therefore not reducing the rate of the envisioned fiscal adjustment....The target for the deficit in 2011 is 17 billion euro or 7.4 percent of GDP, in other words a reduction of five billion euro in relation to 2010 or 2 percent of GDP," a finance ministry announcement said.
The announcement emphasised that Greece had achieved the largest ever fiscal adjustment in its history during 2010, exceeding targets of 5.5 percent, by reducing the deficit by 6 percent of GDP from 15.4 percent or 36.2 billion euro to a projected 9.4 percent or 22 billion euro at the end of the year.
The savings in state spending will result from measures of a structural nature that will save money and curb wasteful spending in the DEKO (public utilities and organisations), reduce spending in the health sector, clamp down on tax evasion and exploit the state's real properties.
The new budget also raises the 11 percent VAT rate to 13 percent and the lowest 5.5 VAT rate to 6.5 percent and will transferring tourist sector enterprises such as hotels and medicines from the higher VAT brackets to the 6.5 VAT bracket. Another corrective measure will be to tax diesel used for heating and diesel used in engines at the same rate, combined with annual heating benefits of 400 million euro.
As a means of reinforcing economic activity and growth, public investments will remain at the same levels as in 2010 (instead of an originally envisated reduction of 500 million euro) and the taxation rate on undistributed profits will be reduced from 24 percent to 20 percent.
According to the budget, the reduction of the fiscal deficit will continue also continue in the subsequent years, and is projected to be contained at 6.5 percent of GDP in 2012, 4.9 percent of GDP in 2013, and 2.6 percent of GDP in 2014.
Parliament president Philippos Petsalnikos announced that the budget will be debated by the parliament plenary in five consecutive sittings, from Saturday, December 18 to midnight Wednesday, 22 December, at which time a vote will take place.
Before voting by the parliament plenary, the budget will be discussed in parliament's standing budget committee.