FINANCE

Ceiling on spending growth

European Commission tells Athens it can increase expenditure by up to 3-3.2% per annum

Ceiling on spending growth

The European Commission has set a ceiling for spending growth of 3-3.2% per year or about 3 billion euros for the next four years for Greece on the fiscal path it recommended, in view of the implementation of the new fiscal rules from 2025.

The proposals that reportedly reached the Greek side envisage an increase in net primary spending by 3% in 2025, 3.1-3.2% in 2026 and 2027, and 3% in 2028. These are proposals which operate within the framework of the Stability Program, which Greece submitted to the Commission last April and may be a little more relaxed. In any case, the National Economy and Finance Ministry has been told it is allowed to implement the government’s program with the benefits announced for the next few years, but not to exceed them.

For 2025, these benefits amount to a total of €870 million and concern: reduction of insurance contributions by 0.5%, costing €215 million; abolition of the fee for practicing a profession, costing €120 million; permanent return of the special consumption tax to farmers, costing €100 million; increasing the student housing allowance, at a cost of €15 million; an increase in pensions, which based on the mathematical formula is estimated to cost around €400 million; and suspension of value-added tax on construction, costing €20 million.

In the coming months the government – ​​like its EU peers – will negotiate with the Commission based on its proposals for the increase of net primary expenditures and the four-year fiscal-structural program will be agreed upon by September 20.

The goal is to reduce debt by 1% of gross domestic product per year at least (for countries like Greece, with debt over 90% of their GDP).

Meanwhile, the final data on the implementation of the state budget in the period January-May, released on Tuesday, confirm the overperformance of revenues. Tax revenues were €24.715 billion, €1.331 billion or 5.7% more than the target included in the introductory budget report.

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