The figures are depressing. In just one month the 2020 budget has gone out the window due to the Covid-19 pandemic, as spending soars as a result of the handouts to workers and enterprises and revenues crumble due to the suspension of corporate tax obligations – and the economic support cycle has only just got started.
Sources at the State General Accounting Office estimate that a hole of 5-6 billion euros has opened regarding the period up to end-April. The math is simple: Typically, the state’s revenue and expenditure amount to about 6 billion euros each every month. More than half of the April takings are expected to be lost, plus some from March, as provisional figures show that in the last 15 days of March about a third has been lost. Therefore, in total, revenue losses in March and April are seen coming to 3-4 billion euros. Spending was already 1.4 billion euros over target before the extension of the handout recipients list. In total it could top 2 billion euros.
Finance Ministry officials don’t even want to think that the crisis may last longer, but the landscape is not at all clear. What is clear is that if up to 5 billion euros is required per month, the figures won’t add up for much longer.
There is no fiscal gap in the short term and the liquidity available should cover needs up to May including the measures announced for tackling the effects of the coronavirus. However, in the long term, unless there is an improvement in conditions in the markets and the economy – which according to analysts is not yet on the horizon – the situation will be quite difficult for Greece without a European solution.
The coming weeks will show whether a brave decision for a eurozone support mechanism will be created. Afterward, halfway through the second quarter, the Greek government will need to find domestic solutions. The use of the cash buffer is for the time being the last resort, but also the strongest weapon for the economy to recover when the current crisis is over.