The government is anticipating a fiscal gap of 1.9 billion euros in the 2015-2016 period, according to the revised midterm fiscal plan it submitted to Parliament on Wednesday, while expecting auxiliary social security funds to require some 580 million euros from 2014 to 2017 to cover their needs.
Athens’s forecast for the fiscal gap is less than half of what its creditors had expected, i.e. 3.9 billion euros, as recorded in a recent European Commission report. Crucially the plan includes no new fiscal measures, with the Finance Ministry insisting that the 1.9-billion-euro gap can be eliminated under certain conditions.
“The Greek government estimates that the satisfactory execution of this year’s budget, faring considerably better than its targets and with the application of structural interventions and the gradual improvement in cash flow, combined with the broader growth initiatives to be announced soon, will wipe out any fiscal shortfall there may exist now for the years 2015 and 2016,” said Alternate Finance Minister Christos Staikouras.
The issue of how the 2015 fiscal gap – estimated by the government at 911 million euros and by the Commission at 2 billion – will be covered will be discussed with the representatives of the country’s creditors in September in the context of the drawing up of the draft budget for next year. Ministry officials are optimistic there will be no need for any new measures and definitely no new cuts to salaries and pensions or tax hikes.
The more successfully fiscal targets are met, the faster the burden on taxpayers can be reduced, the government has pledged. In this context a senior ministry official said a reduction in the special consumption tax on heating oil is likely, along with the maintenance of the low value-added tax rate of 13 percent on food services.
As for the state debt, the plan foresees it falling to 139.1 percent of gross domestic product in 2018, i.e. 14 billion euros below the estimate by the International Monetary Fund.