The cabinet met after Evangelos Venizelos, Greek finance minister, wrapped up negotiations with experts from the European Union, International Monetary Fund and European Central Bank – a group known as the troika – in the early hours of Sunday.
Mr Venizelos’ deputy is expected to present the draft 2012 budget to the Greek parliament on Monday, so the finance minister can attend an emergency meeting of his eurozone peers in Luxemburg. The finance ministers will assess progress on reforms that are required before Greece can secure the next €8 billion tranche of its current bail-out loan.
The budget assumes that Greece’s economy will shrink about 2 per cent in 2012, on top of a projected 5.5 per cent contraction this year, as private consumption plummets and the government slashes infrastructure spending and other public investment.
It is expected to contain spending cuts and tax increases worth about €6.5 billion, including additional levies on income and property that the government plans to start collecting this year.
The budget is projected to achieve a primary surplus next year of €3.2 billion – before paying debt servicing costs – equivalent to 1.5 percentage points of GDP, putting Greece back on the road to fiscal stability. The deficit would fall from a projected 8.5 per cent of GDP this year to 6.8 per cent in 2012. The finance ministry said the deficit figures would be higher than forecast earlier this year because of the country’s deepening recession.
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