ECONOMY

Budget deficit contained in Jan-Feb

The budget deficit was contained in the first two months of the year, but the considerable slump in value-added tax revenues by 8.6 percent and the huge excess in spending for social security funds are the two main threats to the budget, even in its revised form.

Data issued on Wednesday by the Finance Ministry show that the deficit is now under control, given that in the January-February period it came to 495 million euros against a target for 879 million. The primary result of the budget — which does not include interest payments — was positive as the surplus amounted to 367 million euros against a target for a 22-billion-euro deficit. The question is what will happen in the election period, during which fiscal rules are always relaxed.

The fact that the deficit is within targets is mostly thanks to the reduction in the Public Investment Program and its revenues that exceeded expectations and covered the lagging revenue. The program has brought in 251 million euros more than forecast, taking budget revenues in the year to February 29 to 9.258 billion euros against a target for 9.239 billion euros.

VAT revenues missed targets by 277 million euros, coming to 2.921 billion euros, and were 13.7 percent lower than in the same period last year. Consumption taxes improved the overall picture as they fetched 131 million euros more than expected. This was broadly thanks to the special consumption tax on energy products (163 million euros) and tobacco products (134 million euros).

In total budget revenues lagged by 2.8 percent or 232 million euros. On the expenditure side, primary spending fared better than expected by 306 million euros, amounting to 9.562 billion euros, but the main problem is in the disbursement for social security funds, which has already amounted to 27.5 percent of the annual sum. Worse, the country?s main fund, Social Security Foundation IKA has already collected 64.4 percent of the year?s planned allocation.

It is believed that the success in reigning in the deficit in the year?s first couple of months played its part in the promotion of Filippos Sachinidis to the post of finance minister from deputy after the departure of Evangelos Venizelos.