Technical experts representing Greece’s creditors are set to arrive in Athens on Wednesday, signaling the start of the third bailout review, and it appears that the pressure on Athens to fork out its dues to taxpayers has paid off, as the state has found the necessary funds to cover tax rebates of 4.077 billion euros since the start of the year – already exceeding the year’s target by 753 million euros.
The threat of losing out on an 800-million-euro subtranche from the lenders saw the government resort to an unprecedented repayment of debts, mainly of rebates pending for as long as five years. However, this has led to a hole in state revenues amounting to 2.39 billion in the first nine months of the year, according to the provisional budget figures released on Monday.
Finance Ministry officials argue that the increased tax rebates have an impact only on the result and not the fiscal outcome of the budget’s execution, as they also constitute an equal reduction in the obligations of the state, as expired debts have been factored into the deficit.
Still, the reduction in budget revenues forced the government to keep expenditure at low levels to maintain the primary budget surplus intact (actually missing its target by 54 million euros): It reached 4.502 billion against a target of 4.556 billion euros. Spending was 2.316 billion euros below target.
The budget figures will form a key part of the staff-level third-review discussions with the creditors that begin this week against a backdrop of assurance from the International Monetary Fund that it will not seek any additional fiscal measures for 2018.
However, sources aware of the negotiations say that assurance does not change the unfaltering position of the IMF regarding the possibility of measures for 2019 and for another capital strengthening of Greek banks. The same sources add that a year ago IMF head Christine Lagarde was also positive toward Greece, but this did not prevent the complications in the second bailout review.