December 10, 2016 / 8:25 PM / 7 months ago

Greek parliament approves 2017 budget projecting return to strong growth

3 Min Read

Greek Prime Minister Alexis Tsipras delivers a speech during a parliamentary session before a budget vote in Athens, Greece, December 10, 2016.Alkis Konstantinidis

ATHENS (Reuters) - Greek lawmakers approved the country's 2017 budget on Saturday, projecting a return to strong economic growth next year but also imposing a wave of tax hikes and austerity cuts prescribed by its international lenders.

Athens estimates its economy will expand by 2.7 percent in 2017, supported by the trickle-down impact of bailout cash inflows and resurgent private demand. It also sees a primary surplus, excluding debt-servicing costs, of 2 percent of GDP.

If achieved, it would be the first signs of growth for the recession-battered economy since a short period in 2014.

The budget was approved by 152 lawmakers in the 300-seat parliament. Prime Minister Alexis Tsipras called it "a budget "of optimism, growth and economic recovery".

On Thursday, the government said it would distribute a one-off benefit to pensioners ahead of Christmas due to a better than expected fiscal performance in 2016.

Greece says it achieved a primary surplus equal to 1.1 percent of economic output in 2016, outperforming its 0.5 percent target. Its 181 billion euro (£152 billion) economy is expected to contract by 0.3 percent this year, according to the budget draft.

The national debt will be equivalent to 176.5 percent of GDP in 2017, according to the budget, nearly four points lower than this year. Greece's debt-to-GDP ratio is still the highest in the euro zone.

The leftist-led government, which has been accused by its lenders of foot-dragging in the sale of state assets, aims at 2 billion euros in privatisation revenues in 2017.

Greece signed up to an 86 billion euro international bailout last year after tough negotiations. It is now at odds with its official creditors over a projected fiscal gap in 2018 as well as over labour and energy reforms in a crucial bailout review.

The lenders disagree among themselves over how much of a primary surplus Greece may achieve beyond 2018, with the IMF insisting that a 3.5 percent target is unrealistic without significant debt relief and extra austerity measures.

Tsipras on Saturday called on EU partners to support the country over labour reforms and urged the IMF to state clearly whether it wanted to join or leave Greece's programme. The fund has yet to decide whether it will fund the bailout programme.

EU and IMF mission chiefs are expected to return to Athens next week to resume the second bailout review, which Athens wants to wrap as soon as possible in order for its bonds to be included in the European Central Bank's asset-buying programme.

Reporting by Lefteris Papadimas and Renee Maltezou; Editing by Hugh Lawson

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