By T. Tsiros
One of the leftist Greek government’s strategic medium-term goals, as repeatedly enunciated by top ministers over the recent period, is to lower primary budget surplus targets demanded by institutional creditors after 2018.
The loosening of fiscal targets would roughly equal the sum derived every year from the property tax (ENFIA) in the country, allowing the Greek state more leeway on the increasingly tight and highly supervised spending front.
The last year of the Greek program (third bailout) in 2018 includes a very ambitious 3.5 percent primary budget surplus target, whereas the Greek government – and the main opposition – want the target to fall to between 2 and 2.5 percent of GDP.
Nevertheless, the Tsipras government will first have to complete the second review of the Greek program this month, which means that 40 “prior actions” (milestones) must be implemented. The goal, afterwards, is to begin talks on debt relief, even short-term measures beginning in 2018. Only then will the focus turn to reducing primary budget surplus targets.
European creditors have in the past, according to reports, maintained that the target should remain 3.5 percent of GDP through far-off 2029, a prospect viewed with absolute trepidation by practically all political parties and economic centers in the country.
Retaining a 3.5-percent primary budget surplus provision as a fiscal target would essentially mean a memorandum without the funding component, critics charge.
For instance, based on current forecasts for GDP in 2019, a 3.5-percent primary budget surplus goal would oblige Athens to show revenue of roughly 6.9 billion euros more than expenditures in the regular state budget. Conversely, a target of around 2 percent would put the difference at four billion euros, 2.9 billion euros less, or in other words the annual sum generated from the unpopular property tax.
Greece’s annual GDP is forecast to climb back to 199 billion euros in 2019, i.e. a 3.5-percent primary budget surplus means that revenues must exceed expenditures (sans interest rate payments) by 6.9 billion euros. For 2020, the forecast is a GDP level of 205 billion euros, with the same primary budget surplus target (3.5 percent) translating into 7.2 billion euros.
