The fiscal space, created mainly by the better-than-expected revenues of the last few months, was finally made available to finance the measures announced on Tuesday by the prime minister and detailed on Wednesday by the competent ministers, mainly concerning the 300-euro handout to pensioners and the extension of the reduced value-added tax rate on transport and coffee until the end of the year.
According to a Finance Ministry source, the budget’s primary surplus target of 0.7% of gross domestic product this year remains unaffected, while if the measures had not been taken the primary surplus could reach 1% of GDP – which would mean faster debt reduction.
The fiscal cost of the measures is €800 million, of which, as Alternate Finance Minister Thodoros Skylakakis explained, €650 million comprises the net additional costs, while the remaining €150 million had already been foreseen in the budget. According to sources, what was foreseen concerns a part of the allowance for dangerous and unhealthy labor and the payment of outstanding agricultural compensations, amounting to €120 million, which will be paid from the reserve.
The €650 million of additional expenses will come from the additional fiscal space created thanks to the following developments, according to Skylakakis: “The security with which we can now talk about a satisfactory growth rate in 2023, after the upwardly revised Commission forecasts; the course of gas prices, which appears to be stabilizing at much lower levels than the budget predicted, which in turn reduces the subsidy needs of households and businesses from the state but also the energy costs of the general government; and fiscal revenues, tax and social security contributions, but also more generally the course of the fiscal result of 2022, resulting in a transferred fiscal space in 2023.”
However, Skylakakis, noted that “the fiscal space that is likely to be created during the year is not exhausted” and “we choose to have a reserve for any adversities that may arise.”