The government is preparing its case for tax cuts and a lower primary budget surplus ahead of the September visit of Greece’s creditors for their fourth report under the regime of “enhanced supervision” that has followed three painful rounds of austerity programs.
Lower-level “working groups” will get to work on September 16 to prepare for the visit of the senior officials delegated by the creditors on September 23.
Government spokesman Stelios Petsas revealed at Tuesday’s regular briefing that one of the government’s arguments for a reduction of the primary surplus is the decline in Greek bond yields, which helps with the servicing of Greece’s debt.
Petsas referred specifically to Greece’s borrowing 2.5 billion euros with a seven-year bond at a historically low 1.9 percent rate and the recent auction of six-month treasury bills which yielded a rate of just 0.15 percent, compared to 0.85 percent a year earlier, and brought 812.5 million into state coffers.
“The improvement in Greece’s cost of borrowing positively impacts the debt sustainability analysis. This is a fact that boosts our argument for reducing the primary surplus target below 3.5 percent of GDP over the next few years,” said Petsas.
It should be noted that the 3.5 percent surplus target was agreed upon assuming an average borrowing cost of 5 percent. The cost has been drastically reduced since then.
A second argument is the government’s reform strategy. “These reforms will bring in investment, jobs and strong growth,” he said.
The creditors’ inspection tour will be preceded by a Euro Working Group on September 5 and, a few days later, by the prime minister’s customary speech at the Thessaloniki International Fair outlining economic policy for the coming year.
According to sources close to talks with the creditors, there is no issue of a “fiscal gap” in 2019. Things are more difficult for 2020; that’s why Finance Minister Christos Staikouras made no further promises than a corporate tax cut in his interview with Kathimerini last Sunday.