The country’s fiscal record is being sacrificed to the containment of the recession and unemployment, as the 2020 budget now appears destined for a deficit of 7% of gross domestic product.
The new support measures announced by Prime Minister Kyriakos Mitsotakis on Friday have a total budget of 3.5 billion euros, with a net additional fiscal cost of €2 billion. The addition of those measures takes the total amount of resources used for combatting the impact of the pandemic on the economy to €14-15 billion, rising to €17 billion in terms of cash impact.
Based on the revised estimates of the Finance Ministry – which are constantly changing depending on the course of public revenues – this year will close with a general government deficit of over 7%, or €14-15 billion. Around two-thirds of that shortfall will be covered by the increase of the public debt by about €8-10 billion, compared to end-2019, and the utilization of the country’s cash reserves by about €5-7 billion.
If those estimates are confirmed, which to a great extent will depend on whether Greece's experiences a second coronavirus wave – the year will close with state debt soaring around €340 billion, while its ratio to the GDP will approach 200%.
According to the Finance Ministry, while the cost of the new measures comes to €3.5 billion, the fiscal cost comes to €2 billion because the other sum of €1.5 billion practically concerns the redistribution of resources already calculated in the support package but without having been utilized to date. For instance, the state loans program for companies, known as the Deposit To Be Returned scheme, distributed only €600 million in its first phase, against the €1 billion that had been originally set aside for it.
Likewise, there has been a smaller-than-expected absorption of funds for the Syn-Ergasia labor subsidy program.
The ministry had estimated the primary deficit this year to come to 2% of GDP, against an original target for a primary surplus of 3.5% of GDP, set before the advent of the pandemic. Following the recording of the course of revenues in the April-June period, as well as the increase to the support measures’ budget, the primary deficit is now estimated to exceed 3.5-4% of GDP.