A reduction of the public deficit to 7.4 percent of GDP is envisaged in the draft 2011 budget tabled by the Greek government on Thursday, via a fiscal consolidation programme of spending cuts and higher revenues amounting to 14.3 billion euro.

Measures taken by the government in 2010 plus new measures in 2011 are seen increasing state revenues by 7.83 billion euro, while action to cut costs is expected to yield savings of 6.5 billion euros.

The measures raising revenues include the 2010 measures for higher special taxes on tobacco, cigarettes and fuel, higher VAT rates and the 'maintenance fines' imposed for ubiquitous building permit violations in Greek buildings (projected to raise 1.5 billion euro). A further 4.05 billion euro are expected to be raised through additional measures in 2011.

The new measures in 2011 include an increase in the lower VAT brackets - from 5.5 percent to 6.5 percent and 11 percent to 13 percent - that is expected to yield an additional 800 million euro in taxes, offset by a 250 million euro reduction in tax revenues caused by moving tourism services and pharmaceuticals to the lower 6.5 percent VAT rate.

A further 600 million euro is expected to enter state coffers by making tax on heating fuel the same as for diesel, while at the same time paying out 200 million euro in heating benefits.

The above two measures will replace that of moving 30 percent of all products from the 11 percent VAT rate to the 23 percent VAT rate, originally envisaged under the Memorandum for the bailout loans to Greece.

A levy on businesses making a profit is seen yielding one billion euro, while taxation of undistributed business profits at 20 percent instead of 24 percent is seen reducing revenues by 320 million euro.

Another 948 million euro will be raised through the new income tax framework, 300 million euro from the taxation of unauthorised buildings, 270 million euro by increasing land values for tax purposes, 150 million euro in green taxes and 1.59 billion euro from measures to combat tax evasion and sale of contraband goods.

More state revenues are also expected to arise from one-off fees charged in order to issue licences for gambling and other games (700 million euro), exploiting state real property (690 million euro), increases in court fees, faster collection of tax fines, selling broadcasting frequencies, renewing telecommunications licences and extending the lease of Athens airport.

Of the cost-cutting measures envisioned, 1.15 billion euro in savings is expected to arise by transferring the repercussions of measures taken in 2010 to 2011 and another 1.5 billion euro from measures foreseen under the Memorandum for public-sector incomes, the impact of the Kallikratis plan redrawing the boundaries of local government and savings achieved by the Single Payments Authority.

The remaining 3.85 billion euro are expected to arise from new measures in 2011, chief of which is a reduction in health sector spending by 2.1 billion euro. This is seen arising from lower costs for pharmaceutical spending by state hospitals and social insurance organisations, lower prices for pharmaceuticals and a new system for purchasing hospital supplies.

A further 800 million euro in savings is to arise by restructuring state utilities and enterprises, 500 million euro by reducing defence spending, 200 million euro by reducing state-sector operating costs, 150 million euro by introducing income criteria in the payment of family benefits and 100 million by further reductions in the number of those employed by the state with temporary contract.

Draft budget forecasts -4.2 pct growth in 2010

The Greek economy shrunk by 4.2 percent of GDP in 2010 according to the forecasts in the draft 2011 budget unveiled by the government on Thursday. GDP is expected to continue shrinking by 3 percent in 2011 before levelling off, while positive growth is forecast to resume in 2012, rising to 1.1 percent of GDP and then 2.1 percent of GDP in 2013.

Unemployment levels are also seen rising from 12.1 percent in 2010 to 14.6 percent in 2011, 14.8 percent in 2012 and 14.3 percent in 2013.

2011 budget, public property management

The management of the public sector's property through privatisations and floatings is targetted at one billion euros over the 2011-2013 period.

The government's strategy in the sector of denationalisations and the better management of the public sector's property, as described in the 2011 budget is the following:

Banks: Agricultural Bank, Hellenic Postbank, Deposits and Loans Fund, Attica Bank.

Infrastructures, transport and communications: Athens Interna-tional Airport, regional airports, Hellenic Rail (OSE), motorways, Hellenic Post (ELTA), frequencies' spectrum.

The implementation of the existing European directives will lead to the partial revision of partnership relations between commercial activities and distribution networks.