ATHENS: Greece revealed progress on its budget deficit on Friday but increased expected recession next year in a budget of austerity mixed with optimism, and hanging on a debt deal with banks.
The blueprint was published as auditors from the European Union, the European Central Bank and the International Monetary Fund headed to Athens for negotiations on a debt rescue deal brokered by the eurozone last month.
The figures forecast that Greece's budget deficit will drop to 5.4 percent of gross domestic product (GDP) in 2012 from 9.0 percent this year, an ambitious target given the previous forecast for next year of 6.8 percent.
At the same time, the unity coalition under former ECB deputy chief Lucas Papademos estimated that the economy would shrink next year by 2.8 percent, a deeper contraction than the 2.5 percent previously estimated.
The economy shrank by 5.5 percent in 2011, the third year of recession.
Finance Minister Evangelos Venizelos said he hoped Greek lawmakers would approve the budget before an EU summit on December 9, an indication of the new government's determination to appease its creditors in return for loans urgently needed.
He also said he believed no new austerity measures were needed beyond what had been agreed by the previous socialist government, although deeply unpopular reforms slashing the public sector must still be implemented.
Many Greeks are already at breaking point after two years of austerity measures involving sweeping pay cuts and tax rises, and more than 40,000 people joined protests against the measures on Thursday in Athens and Thessaloniki.
The estimated deficit figures would put Greece well within the goals agreed with its EU and IMF creditors, after it missed its 7.4 percent target by a long shot this year, but they are highly dependent on a still shaky debt deal.
Eurozone leaders agreed with the banks last month to write off 50 percent of Greek debt as part of a second rescue plan which also provide Athens with 100 billion euros in loans and 30 billion euros to recapitalise its banks.
The man leading the talks on behalf of the banks, Institute of International Finance chief Charles Dallara, said Thursday he hoped to reach agreement on the details of the deal, worth 100 billion euros, within weeks.
Venizelos said he hoped all of Greece's private creditors would sign up to one of two or three models being hammered out, adding: "We will do all we can."
According to the budget, the government's interest payments on its debt will fall to 12.75 billion euros in 2012 from 16.38 billion euros this year following the debt deal. Without the agreement, the payments would total 17.9 billion.
Papademos' new government of socialists, conservatives and a small far-right party is in a race against time to implement the reforms demanded by the EU and IMF, most pressingly to release eight billion euros in loans frozen since August.
The funds, which must be delivered by December 15 to stop Greece going bankrupt, are part of a 110-billion-euro bailout agreed in May 2010 which have been held up by delays in the implementation of reforms and a political crisis.
The government is now working on an overhaul of the tax system to cut tax breaks and tighten income thresholds in a desperate bid to fill state coffers.
A wider economic downturn is also a factor in delays over enacting demands by the EU, ECB and IMF that Greece raise 50 billion euros through privatisation by the end of 2015.
The first five billion was due this year but Venizelos said he expected Greece would only raise 1.8 billion euros. An EU report on Thursday was more pessimistic, suggesting Athens would only raise 1.3 billion euros by December 31.
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