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Debates on the government budget for 2010 will be now held in the Parliament in Athens. They are expected to end on Wednesday when Members of Parliament will cast their votes.

As anticipated, the 2010 budget focuses mainly on bringing borrowing down to 9.1% of GDP, which translates to a decrease of €8.4 bn. As a means of comparison, the government deficit for 2009 was 12.7% of GDP – way above the European Union’s euro-zone requirement of 3%.

The government plans to achieve the decrease using the usual measures in cases of high deficit:

           -           by increasing tax revenues by €4.5 bn

           -           by cutting spending by €2.3 bn

           -           by bringing hospital spending down by €1.4 bn

           -           by limiting expenses on arms and military equipment to €500 million

Economic experts working at the government are planning to bring the deficit down mainly by increasing tax revenues. To do that, they are betting on the success of the tax system reform promising to tackle tax avoidance. A further widening of the tax base is also expected, together with spending cuts, mainly derived from the so called “flexible” expenses.

Experts from the ministry have also admitted that Greece will stay in recession in 2010, which will however slow down year-on-year. GDP is expected to shrink by 0.3% next year, compared to the 1.2% of 2009. Year-on-year inflation is expected to rise to 1.4% from 1.2%.

Government debt will soar to 120% of GDP, amounting to almost €300 bn, with interest expenses exceeding €12 bn.

Finance Minister Georgios Papakonstantinou was quoted saying that the new tax bill is expected in parliament by March 2010. The bill will clarify the derivation of people’s income which will make tax avoidance more difficult. It will also reinstate the inheritance tax and consolidate tax stakes into a common framework.