Economic packages being prepared
At the prime minister’s office they are planning the new measures to prop up businesses and employees hit by the pandemic and, in the longer term, tax breaks for 2021 to the tune of €1.5 billion.
The aim is to announce details of the plans mid-September, although Prime Minister Kyriakos Mitsotakis will deliver his keynote economic policy speech in Thessaloniki in the first week of the month, although the Thessaloniki International Fair has been canceled.
Most of the cuts will on average involve a 2% reduction in social security contributions.
At the Finance Ministry they are crunching the numbers to see if the original estimation of a 7.8% drop in the gross domestic product (GDP) for 2020 holds up or more dire projections must be made. In any case, said a Finance Ministry source, the margins for further spending will be known well before the final decisions are taken on the new support package.
Until recently, it was believed at the ministry that the economy would start revving up again by October and that state revenue would rise. However, a few days ago, Alternate Finance Minister Theodoros Skylakakis declared that the coronavirus pandemic will continue to affect public revenue “very significantly” for a long time, by negatively impacting tourism and exports.
Under the circumstances, the tax break package for 2021 will be less than the government would have wanted, with 800 million euros of the €1.5 billion total being financed from the EU’s Recovery Fund.
Before the government’s announcement, the Eurogroup meeting of eurozone finance ministers will take place on September 11 and hopefully agree to waive the deficit and debt targets, as governments know well that tax contributions will not rise in 2021.
Aid measures in the fall package will not target just tourism and bars, cafes and restaurants this time. The need to provide liquidity to enterprises, as well as incentives to hire people, affect many sectors. There are dozens of demands for aid from employer associations, reflecting their concern that there may be no recovery at all in the remaining months of the year.
