First good news anticipated in March’s Eurogroup

First good news anticipated in March’s Eurogroup

In March the government is anticipating a positive decision by the Eurogroup regarding at least one of the three requests it has submitted to the creditors so as to secure some additional fiscal space, according to a senior Finance Ministry official.

These three requests concern the option of transferring any primary surplus overruns to the following year (smoothing mechanism), the exemption of any extraordinary spending relating to the migration crisis from the fiscal result, and the use of eurozone central bank earnings from Greek bond holdings (SMPs and ANFAs) for investments.

As Brussels sources agree that any decision on the SMPs and ANFAs will probably come in June, it is likely that decisions at the March 16 Eurogroup will concern either migration-related spending or the smoothing mechanism. Finance Minister Christos Staikouras told Thema FM radio on Friday that the 2019 budget will probably close with some primary surplus excess, as the rate will be somewhat above the target of 3.5 percent of gross domestic product. However, the likely decision on the transfer of the overrun will concern the fiscal results of this year on.

Regarding the target for the reduction of the primary surplus targets, the decision will probably be put off till the fall, ahead of the submission of the 2021 state budget. Staikouras said on Friday that the government would ideally like to see the eurozone finance ministers decide about that in June, as in May Athens will table its midterm fiscal plan that should contain the forecasts for the primary surpluses of the coming years. However, he said, “the deadline is October 2020.”

Staikouras intends to use 70 percent of the fiscal space to be created for tax breaks (at first the solidarity levy and the Single Property Tax – or ENFIA) and 30 percent on additional expenditure, including a possible increase in defense spending. The minister stressed that if such a need arises the fiscal target will not be put at risk, and in any case there would be a redistribution of spending in order to strengthen defense.

Negotiations with the creditors’ mission chiefs concluded yesterday in a positive atmosphere, according to the senior official, while some aspects will be discussed via conference call by mid-February, as the assessment report is scheduled for February 26.

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