NEWS

Greek government planning more handouts ahead of elections

greek-government-planning-more-handouts-ahead-of-elections

As the government seeks to bolster its flagging ratings in an election year, Finance Minister Euclid Tsakalotos is under pressure to formulate a new package of handouts, without upsetting the country’s international creditors, Kathimerini understands.

The first set of measures is expected to be announced before the European Parliament elections at the end of next month and the second set before general elections which are scheduled to take place in October (with speculation that they may be called earlier having died down recently).

Prime Minister Alexis Tsipras wants a package of measures ready in time for the European elections and proposals made by various government aides exceed 1 billion euros.

However, government officials must overcome any objections by European Commission officials who have estimated that Greek authorities have only about 70 million euros in fiscal space to work with.

The remainder of an estimated primary surplus of around 650 million euros has essentially already been accounted for as the state must honor a series of court decisions ordering the reimbursement of pension and salary cuts to civil service workers and pensions.

Moreover, the Commission has been warning Greece that the high primary surpluses of recent years have been achieved at the expense of public investments.

The leftist government has systematically trimmed the public investment program over the years to secure high primary surpluses that it has then distributed as social benefits. A repetition of this tactic is unlikely to go down well with creditors.

Also, if Greece is to avoid reducing the tax-free ceiling in 2020, in line with original bailout commitments which it has since modified, authorities will have to secure fiscal space of 2 billion euros, according to EU officials.

Greece’s lenders are also concerned about the cost of a series of judicial decisions that have essentially revoked certain bailout measures. According to a recent report by the International Monetary Fund, the total cost of those rulings, were they all to be enforced, would reach around 10 billion euros.