Fiscal leeway leads to handouts

Fiscal leeway leads to handouts

Finance Minister Euclid Tsakalotos on Thursday said he is planning to meet with Prime Minister Alexis Tsipras on Saturday to decide on the handouts the government will be announcing next week, in an effort to capitalize on the primary surplus overrun projected for this year, according to figures forwarded to the European Commission.

The midterm fiscal plan Athens has submitted to Brussels provides for a fiscal leeway of 0.6 percent of gross domestic product this year and between 0.4 and 1.1 percent in the next three years, allowing the government to announce handouts of 1 billion euros for this year, rising to almost 2 billion per year by 2022.

In total, over those four years, the excess revenues for the state are projected to reach 5.5 billion euros.

The plan, named “Stability Program,” provides for a primary surplus of 4.1 percent of GDP – against a requirement by the creditors for 3.5 percent – slipping to 3.9 percent in 2020, before it climbs back to 4.1 percent in 2021 and 4.6 percent in 2022.

These planned overruns are allowing the government to prepare a handout spree that, Tsakalotos said during a visit to the northwestern city of Ioannina, will be one of the subjects discussed with Tsipras on Saturday.

The minister said the government has “almost decided” on the fiscal leeway available, leaving the specific measures for easing the burden on taxpayers to be specified, once needs have been prioritized.

Tsakalotos hinted at the government’s planned generosity in his response to a question about the recovery of the market. “And you haven’t even seen what we are about to announce,” he said.

It remains unclear to what extent the planned handouts have the approval of creditors, whose mission chiefs are arriving in Athens on Monday for three days, as part of the third post-bailout assessment.

In the fiscal plan tabled, the government does not reveal its intentions on the use of the fiscal space created by the surplus overrun, nor does it refer to the issue of the reduced tax-free threshold that is supposed to apply as of January 2020.

Tsakalotos said this will be presented “when the time is right.”

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