ECONOMY

Greece agrees to aim for primary surplus

The government appears to have abandoned its election pledge for a balanced budget, as Finance Minister Yanis Varoufakis on Tuesday expressed its commitment to the achievement of annual primary surpluses of 1-1.5 percent of gross domestic product in the long term.

While this statement shows the government might not intend to implement the overoptimistic bailout agreement target primary surpluses of 4.5 percent up to 2020, it does indicate that the SYRIZA-led administration does not intend to abandon the course of fiscal adjustment altogether.

At the same time, the Finance Ministry appears to be paving the way for promises made by ministers that will likely weigh considerably on the state budget and require offsetting measures, as in the case of freezing the zero-deficit clause for social security funds, supplying pensioners with a Christmas bonus, public sector hirings and so on.

Besides Varoufakis, Alternate Minister for International Economic Relations Euclid Tsakalotos made clear that until a definitive agreement is reached with the eurozone, the government will not proceed with measures that would add new costs to the budget.

In their meetings in London on Monday Varoufakis and Tsakalotos also stressed that all bills submitted by ministries would need to have the approval of the Finance Ministry, which will also be responsible for meeting the fiscal targets.

According to the existing program, Greece must achieve a primary budget surplus of 3 percent this year, rising to 4.5 percent in 2016 and 2017, and dropping to 4.2 percent thereafter. The new government has rejected this plan and is proposing a steady fiscal course with primary surpluses of 1-1.5 percent for the next few years.

Still, eurozone and International Monetary Fund officials estimate that Greece’s 2015 budget has already run into problems and that it will be very difficult to meet even the modest target of 1.5 percent of GDP this year without any new government measures.