The government is heading to Thursday’s Euro Working Group of senior eurozone finance ministry officials – who will decide on pension cuts and other measures to be taken by Athens – armed with the statistics of a “magical” primary budget surplus of 6.46 billion euros. At the same time, warnings about a possible fiscal derailment continue unabated.
The primary surplus figures announced on Wednesday by the Finance Ministry were borne out of the market’s deprivation of liquidity through the freeze on tax rebates and the insufficient execution of the Public Investment Program. This appears to be the government’s final move to show its creditors it will achieve a considerably higher budget result than the target of 3.5 percent of gross domestic product, not only this year but also in 2019.
However, an increasing number of experts are expressing concern over fiscal instability in the next few months, mainly due to the upcoming elections, with the president of the Hellenic Fiscal Council (HFC), Panayiotis Korliras, adding his voice on Wednesday to that of the European Commission and just this week the Parliamentary Budget Office.
In the HFC’s fall report, Korliras wrote that “the big challenge is the full recovery and consolidation of the credibility of the financial policy, during an election year too, in the face of all the tension that may be generated.”
Further cited in the report as possible sources of uncertainty for the economy next year are borrowing conditions for the Greek state and local enterprises in international money markets, the operation of the banking system, especially regarding the effort to reduce nonperforming loans, and international developments.
The achievement of a primary surplus of 3.5 percent of GDP is taken for granted by the HFC, but it estimates that “it would make sense” for the so-called social dividend – i.e. the income criteria-based handouts to taxpayers from the excessive state revenues – to be distributed this year “to be lower than last year’s.”
The report also issues warnings on the likelihood that the Public Investment Program’s spending target will not be met and will be missed by some 1.2 billion euros, and on the shortfall of 200 million euros in income tax revenues from individuals.