ATHENS: Greece's economy, expected to slump for a sixth straight year in 2013, may begin to recover in 2014, the country's finance minister said yesterday.
"I believe that after the second half of 2013 we will be able to see growth, with positive rates of change in GDP on a quarterly basis or month-by-month," Finance Minister Yannis Stournaras told Imerisia newspaper yesterday.
Wage cuts and tax increases will keep the economy in a sixth consecutive year recession in 2013, with national output projected to shrink by 4.5 percent, based on official estimates.
The economy has contracted by a cumulative 24 percent since 2008, according to the country's central bank.
"Whatever positive we achieve henceforth will be like rain falling in the desert, given that the country will be waking up from a recession of unprecedented duration," Stournaras said.
In a separate speech to a medical conference, Stournaras said Greece would use 16 billion euros to recapitalize banks next week, and another 7.2 billion in the first quarter, after international lenders said they would resume aid payments on Thursday.
Euro zone partners and the International Monetary Fund agreed to unlock 49.1 billion euros in aid by the end of March. The decision to release the long-delayed installment came after Athens passed austerity measures and completed a debt buyback.
Greek banks will get the capital injection from the Hellenic Financial Stability Fund (HFSF), which has already provided 18.5 billion euros to the country's four biggest lenders.
"Banks will be able to boost their portfolios with new, strong bonds from the EFSF (European Financial Stability Facility), without accessing the (central bank's) ELA (emergency liquidity assistance) mechanism," Stournaras told the conference.
Athens is aiming at a primary budget surplus next year.
Greece has also formally unveiled a bill to boost tax revenues under the terms of its international bailout, part of a two-pronged attack to get its citizens and firms to pay their way.
The planned measures are estimated to increase tax revenues by about 2.5 billion euros in 2013-2014, the Finance Ministry said.
A second bill to be introduced later will to reform a tax administration widely seen as corrupt and ineffective in combating rampant tax evasion.
The first bill, introduced, late on Thursday, scraps many tax exemptions and raises tax rates on property, companies and households with above-average income. There is also a tax on capital gains for stock sales.
"The proposed legislation is part of wider plans to create a just and effective tax system, reorganize the tax collection mechanism and apply a stricter framework against tax evasion," said the draft legislation.
The bill is part of an overall 13.5 billion euro austerity package for the next two years that Athens passed last month to qualify for further EU/IMF bailout funds.
Wage cuts and tax increases will keep the economy in a sixth consecutive year recession in 2013, bringing total economic contraction in 2008-2013 to 24 percent, according to estimates by the country's central bank.
Getting the tax bill through parliament is among the conditions Athens must fulfill to get 14.7 billion euros in rescue loans by the end of March, on top of the 34.3 billion its lenders cleared on Thursday for disbursal.
Athens depends on the bailout funds to avoid a chaotic bankruptcy that might force it to exit the euro and to recapitalize its banks, a key condition for economic recovery.
The tax bill will be a further test for the cohesion of Greece's fragile, three-party ruling coalition under conservative Prime Minister Antonis Samaras.
The austerity measures it has taken since winning power in a June election have dented its popularity. A Public Issue/Skai poll published on Friday showed the leftist, anti-bailout Syriza party with a 4.5 point lead over Samaras's New Democracy party.
A date for a parliamentary debate on the tax bill has not been set yet. According to a government official, it might be voted after the Christmas holidays.
Under the draft legislation, Greece will raise the tax rate on corporate profits to 26 percent from 20 percent but lower the tax on distributed dividends to 10 percent from 25 percent.
Capital gains from stock trading on the Athens stock exchange will be subject to a 20 percent tax from April next year, while interest income from bank deposits will be taxed by a higher 15 percent rate versus 10 percent currently.
The bill reduces the current eight tax brackets to three, imposing a 42 percent top rate on incomes above 42,000 euros. Currently, a 40 percent tax rate applies to those earning over 60,000 while incomes over 100,000 are taxed at 45 percent.
Wage earners and pensioners earning up to 25,000 euros will be taxed at 22 percent. Incomes above 25,000 and up to 42,000 will be taxed at 32 percent.
Rental income up to 12,000 euros will be taxed at 10 percent. Above this threshold the tax rate will be 33 percent.
The tax reform will do away with many tax exemptions, including part of the interest paid on home loans and insurance. But there will be relief for those earning up to 21,000 euros a year — a 2,100 euro tax credit, phase out on higher earners.