Greek budget promises higher growth, tax cuts

By Lefteris Papadimas and Deepa Babington ATHENS (Reuters) - Greece's government unveiled its 2015 budget on Monday, promising a second year of growth and tax breaks aimed at easing austerity imposed after the country sank into its deepest post-war economic crisis. The budget largely confirmed targets for growth and a budget surplus before interest payments set under Greece's 240 billion euro (187.48 billion pounds) EU/IMF bailout, and said Athens planned more bond sales after a successful return to debt markets this year. "The country is entering into a long period of sustainable growth and primary budget surpluses," Deputy Finance Minister Christos Staikouras told reporters. "This is the result of unprecedented sacrifices by Greek households and businesses." After nearly five years on EU/IMF aid that has come at the price of painful austerity measures, Greece has made progress in getting its finances back on track and its battered economy has begun to stabilize. The forecast of a 0.2 percent fiscal deficit for 2015 meant Monday's budget was the closest to a balanced budget presented by Athens in over three decades. But investors fear Greece is on track for a new political crisis when lawmakers elect a new president in spring next year, which could trigger snap polls if Prime Minister Antonis Samaras fails to get opposition support for his candidate. Parliament, by law, must be dissolved if it cannot elect a president. Athens last month announced it was hoping to ditch its bailout package at the end of the year, more than a year ahead of its scheduled end in early 2016. Samaras is gambling that pulling the plug on the unpopular programme will help him secure the support of anti-bailout lawmakers in the presidential vote. As part of the government's effort to rally austerity-hit Greeks and lawmakers before that vote, the budget includes previously announced cuts to taxes introduced at the peak of the crisis - including a 30 percent cut to both a tax on heating oil and a special "solidarity" tax. A lowered 13 percent rate for value-added tax at restaurants will be maintained. That elicited little cheer on the streets of Athens, where four years of pay and spending cuts have slashed incomes by over 30 percent and sent unemployment over 27 percent. "It doesn't make a difference to us. We are desperate. They always promise they'll fix things and they never do," said Constantinos Georgiou, 40, who works with the country's armed forces and is due to benefit from the budget pledge to gradually raise salaries for the uniformed services after a court ruling. "I can hardly make ends meet." The radical leftist, anti-bailout Syriza party, which opinion polls show would win if elections were held now, accused Samaras of handing out inconsequential tax breaks, calling them "beads and mirrors" to appease taxpayers. ON TARGET Emboldened by two successful forays into debt markets this year after a four-year hiatus, Athens said it would issue a seven-year and a 10-year bond as well as a Treasury bill of over 26 weeks next year. It also confirmed Athens expects to report a budget surplus excluding interest payments of 2.9 percent of GDP next year, just shy of the 3 percent target set under the bailout. It is expected to top forecasts to stand at 2 percent this year. The budget also predicted Greece's economy would grow in line with bailout forecasts at 2.9 percent next year and 0.6 percent this year. Debt is seen falling to a lower-than-expected 168 percent of GDP from 175 percent this year. Greece topped its fiscal targets and posted a budget surplus in 2013, a year ahead of schedule, paving the way for some form of additional debt relief from its euro zone lenders. Talks on further debt relief will start later this year, after EU/IMF inspectors visiting Athens conclude what is likely to be their last joint review of the country's finances and reforms. But jitters about Greece's ability to finance itself and avoid snap elections have added to an air of malaise around the government, which has just a four-seat parliamentary majority and relies on the support of the weak Socialist PASOK party. In a bid to quash speculation of snap elections, Samaras has called a confidence vote this week, which he is likely to win without any trouble. (Additional reporting by Renee Maltezou, George Georgiopoulos, Angeliki Koutantou and Karolina Tagaris, Writing by Deepa Babington, Editing by Jon Boyle)