Aiming for a modest primary surplus

The cushion of the primary budget surplus that the Finance Ministry had been counting on for 2014 is deflating. The authorities are now making plans to revise the gross domestic product target of 2.3 percent included in the mid-term fiscal plan to just above 1.5 percent of GDP that the bailout agreement provided for.

his development is attributed to the incorporation of various risks such as a likely overshoot in expenditure for healthcare, social security funds and local authorities and a possible shortfall in budget revenues, particularly income tax takings, where a hole of 1 billion euros has been identified.

As for next year’s targets, the ministry is unlikely to cover the bailout agreement’s target for a primary surplus of 3 percent in the draft budget, but instead will probably deal with the issue in the final draft of the budget at the end of November. The reason for that is because there is a fiscal gap whose size and coverage have yet to be agreed on with the creditors.

Athens argues that the gap amounts to 900 million euros, while its creditors say it’s more like 2 billion euros. Talks on the issue are expected in the coming days, while negotiations on the measures required to cover the 2015 gap will be postponed until a later date.

At this stage the ministry will negotiate with the creditors’ representatives on the basis of the fiscal figures for the first eight months of the year, published on Friday by Alternate Finance Minister Christos Staikouras.

They show that the target of a 1.5 percent primary surplus at the end of 2014 is attainable, as in the year to end-August it amounted to 1.95 billion euros, against a target for 962 million.

Revenues before tax returns posted a 100-million-euro shortfall, while total net revenues came in 325 million below target. This is mostly attributed to the extension granted for the payment of the property tax.

At the same time tax returns amounted to 2.2 billion euros, against a target for 2 billion euros and from 1.2 billion in the first eight months of 2013.

Primary expenditure was contained at 27 billion euros, bettering the target by some 1.2 billion.

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