Fresh confusion reigned on Thursday as a result of the government’s target for the primary budget surplus and new measures for 2015, as proposed to Wednesday’s Euro Working Group teleconference.
The target set by the bailout agreement is for a primary surplus equal to 3 percent of gross domestic product. The agreement reached at the February 20 Eurogroup provides for the level of the primary surplus to be determined by the extent of growth, and with this in mind the Greek side is now arguing that the new target should be between 1.2 and 1.5 percent of GDP.
However, in the latest list of reforms and measures sent to the country’s creditors by Finance Minister Yanis Varoufakis there is a chart that takes into account the rise in revenues the ministry expects from the measures it proposes and puts the expected primary surplus at between 3.1 and 3.9 percent of GDP for this year. This is because the measures proposed are seen having an impact of between 4.7 and 6.1 billion euros.
In this context, Thursday’s ministry statement raised more than a few eyebrows as it effectively questioned the very efficiency of the measures it has submitted. “If eventually the highest revenue expectations are realized, then public spending will rise accordingly and therefore expenditure for combating the humanitarian crisis,” the ministry said in its statement.
It added that “the Finance Ministry wishes again to make it clear that it remains committed to the target of 1.2 percent [of GDP] as this rate is close to the minimum level of its forecasts and not the maximum one, which has been used by those who spoke of a rate above 3 percent,” despite the fact that the forecast for a primary surplus of 3.1-3.9 percent of GDP is included in the text of the Greek proposals.
Just as the Finance Ministry issued that statement, the prime minister’s office noted that the target for this year’s primary surplus will be between 1.2 and 1.5 percent of GDP and characterized the Greek proposals as “a working text” and not an agreement text. “It is estimated that if all measures are successfully implemented they should produce a fiscal benefit of 4.7-6.1 billion euros,” a source from the prime minister’s office said, adding that “a fiscal measure has never performed fully.”
In that context, the prime minister’s office noted that “if we achieve any surpluses above the level we have committed to [1.2-1.5 percent], they will be returned to the social groups that are experiencing the consequences of the crisis in a tragic way, through the realization of the government’s election pledges.” It then insisted that “the baseline scenario is for a primary surplus of 1.2-1.5 percent of GDP.”