The government expects additional fiscal space of 600 million to 1 billion euros through the increase of tourism revenues this year to 90% of the record-breaking year of 2019, compared to 80% that was provided for in the Stability Program drafted in spring.
This is the margin on which Athens is pinning its hopes for the continuation of support measures, e.g. in gasoline, as Fuel Pass 2 expires at the end of September, and maybe something more, depending on the timing of the elections. Measures already taken this year – most against energy hikes – reach up to €8.5 billion, of which €3.2 billion burdens the budget (the rest is covered by the Energy Transition Fund).
On the other hand, as Finance Ministry officials explain, any additional income from tourism is also viewed as a safety net against a further increase in electricity rates. The measures announced to curb the tariffs that burden consumers, amounting to €850 million for the second half of this year, are based on the assumption of an electricity price of €225 per megawatt/hour. At a rate of €300/MWh, as it is today, the cost for the entire second half would jump to €1.5 billion, ministry officials estimate. That would exhaust or even exceed all additional budget space from a possible good tourism season.
The price rally may not last all year long, but the reduction in gas flows from Russia does not allow for complacency. In fact, if the reduction intensifies in the near future, a high-ranking ministry source notes, there is a risk that Europe will enter a recession, so all data will change, obviously for the worse for Greece as well. “Then we are talking about another scenario,” he comments.
Therefore only if electricity does not exhaust the leeway tourism is expected to offer and recession does not strike Europe can there be room for additional benefits, within the limit for a primary deficit of 2% of gross domestic product, explain ministry officials. At this stage, meeting the 2% threshold is important for the government, as a possible fiscal derailment would be costly in terms of the country’s borrowing costs and the target of investment grade.
In any case, many new measures do not “fit” with the deficit target of 2% of GDP. At present, with the assumptions of the Stability Program, there is no additional margin.