By T. Tsiros & N. Bellos
Fiscal targets, or fiscal "adjustment", will come in two installment after the end of the current third bailout in August 2018, according to reports from Athens this week, which come amid strong indications that an agreement between the Tsipras government and institutional creditors is days away.
Specifically, fiscal measures - essentially new austerity measures - for 2019 must reach 1 percent of GDP, which by current forecasts means roughly two billion euros in absolute terms. The second package of measures, also calculated to reach 1 percent of GDP (roughly two billion euros) will be left for 2020.
The looming agreement between the embattled leftist-rightist government in Athens and institutional creditors means that measures agreed to now and sent for ratification to the current Parliament will be enacted in a period after the next scheduled general election - i.e. in 2019 and 2020.
At the same time, whatever "countervailing measures" will also be divided into two installments, which according to the latest reports, will be implemented only if fiscal targets are achieved in 2019 and 2020. The primary "target" is none other than a 3.5 percent primary budget surplus, as a percentage of GDP for the specific year.
In comments to "N" on Wednesday, government officials declined to go into details over measures. However, it appears that the Greek side will agree to a compromise whereby the tax-free threshold for annual income will be gradually reduced. The same manner will also reportedly be followed for pension cuts, via the "harmonization" of social security benefits method.
The current tax-free threshold for annual income stands at roughly 8,600 euros, after it was cut last year by the Tsipras government. Creditors, especially the IMF, want the threshold lowered to below 6,000 euros. The reasoning, as previously and repeatedly cited by the Fund, is to expand Greece's narrow tax base and receive tax revenue from more wage-earners and self-employed professionals. Nevertheless, this austerity measure may also be bumped to 2020.
In similar fashion, the next round of pension cuts could be taken in two installments, the first in 2019 and the second in 2020.
