Primary surplus plans feed speculation about handouts
The midterm fiscal plan for the next four years provides for primary surpluses far above the target of 3.5 percent of gross domestic product, reaching up to 5.19 percent in 2022. This opens the door for government handouts ahead of the next general election.
According to the estimates of the Hellenic Fiscal Council, which has assessed the Medium-Term Fiscal Strategy Framework for 2019-2022, the primary surplus overrun is expected to reach 111 million euros this year, before rising to 866 million in 2019, 1.29 billion in 2020, 2.11 billion in 2021 and 3.58 billion euros in 2022.
The excessive primary budget surpluses – the outcome of overtaxation so far and the upcoming reductions to pensions and the tax-free threshold in the next couple of years – are already feeding political expectations for handouts.
Alternate Finance Minister Giorgos Houliarakis told SYRIZA deputies on Tuesday that all of the 2019 primary surplus surfeit will be used for tax discounts in 2020.
Three-quarters of the 2020 excess will go to tax discounts and 25 percent to handouts, and then the primary surplus overruns of 2021 and 2022 will be evenly split between discounts and handouts.
Prime Minister Alexis Tsipras had said last week that the midterm fiscal plan will create a “fiscal margin” of over 700 million euros in 2019 and 1.3 billion in 2020, to be used to ease the tax burden on Greeks.
Likewise, Finance Minister Euclid Tsakalotos told Ethnos newspaper in an interview that “besides the 700 million euros to go to permanent tax reductions as of 2019, there will be some additional margin for permanent interventions for the following years, that will be expanded each year.”
Crucially, the fiscal council commented that the forecasts for increases in private consumption by 1 percent next year and 1.2 percent in 2020 are optimistic, due to the pressure on households’ disposable incomes from tax and social security obligations.