The Finance Ministry is preparing its midterm fiscal plan for the period from 2018 to 2021 based on achieving primary budget surpluses of 3.5 percent of gross domestic product. The plan constitutes one of the prior actions provided by the agreement between the government and its creditors for the second review to be completed.
The midterm plan will be included in an omnibus bill to be tabled in Parliament next week, with the aim of having it voted the week after, by May 18, ahead of the May 22 Eurogroup meeting.
Although it has not yet been determined precisely how long Greece should aim for a 3.5 percent primary surplus for, as this is part of the negotiations for the easing of the debt, it is certain that this target will apply until at least 2021. Word from last month’s Eurogroup in Malta pointed to an agreement for this target remaining for five years ahead, so it may apply up to 2022 and then drop.
The draft agreement reached early on Tuesday provided for the period up to 2021 as the Finance Ministry had been estimating until recently that it could attain a primary surplus of 3.8 percent next year and get to 5 percent of GDP in 2021 without any new austerity measures.
For 2018 the midterm plan will have to provide for the adoption of parametric measures to cover the fiscal gap forecast.
Those measures include the abolition of tax discounts (on medical spending, the 1.5 percent discount on the monthly tax withheld from salaries etc), a halving of the heating oil subsidy, the introduction of tax on short-term property rentals, the further rationalization of healthcare expenditure, the reform of performance incentives in the public sector and the abolition of social benefits such as family allowances and unemployment benefits covered by the Solidarity Social Income.
The decision on the adoption of the so-called countermeasures, that will go some way toward easing the burden on Greek taxpayers, will be made in mid-2018 by the International Monetary Fund in cooperation with the European institutions.