Three demands that could fetch 6 bln euros for Greek economy

Three demands that could fetch 6 bln euros for Greek economy

The government’s negotiation plan for the ongoing fifth post-bailout assessment of the Greek economy provides for investments totaling 3.4 to 4 billion euros and fiscal space for tax breaks worth 2 billion euros in 2021 and 2022, as well as scope for even more tax cuts in case of overperformance.

The government will stake three claims, which if implemented could provide the country’s growth momentum with a major boost. The first concerns the reduction of the primary surplus target from 3.5 percent of gross domestic product for 2021 and 2022 to 2 or 2.5 percent of GDP. That would grant the government some 2 billion euros in the next couple of years.

The second relates to the change in the use of eurozone central banks’ profits from Greek bond holdings (SMPs and ANFAs) from servicing the national debt to funding investments. This decision could apply from the tranche due in the second half of 2020, for a total benefit of 3.4 billion euros for the economy.

Finally, Athens will propose the operation of a smoothing mechanism that would transfer any excess in the primary budget surplus from one year to the next. The scope here could prove huge, considering the size of overruns in previous years that exceeded 1 billion euros per annum, although that would also point to poor planning.

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