By Chrysostomos Tsoufis

On February 23, we wrote about the big fiscal surprise that the Greek government is preparing for the markets with the burning goal of course of obtaining investment grade.

Not even we imagined at the time that things would be so much better than what we wrote.

From the stage of the event on the resilience of the Greek economy and in front of the president of the Eurogroup and of course the prime minister, Christos Staikouras revealed that the 2022 budget closed with a zero primary deficit when the initial estimate spoke of a deficit of 1.6%, approximately i.e. €3.4 billion. At the same time, he vindicated his leader Parliamentary Budget Office Francis Koutentakis who first spoke about the possibility of the budget closing even with a small primary surplus.

One doesn’t need to be a financial whiz to see where this “beyond all doubt” better fiscal outcome came about. The main reason has to do with growth.

In the introductory report of the budget for 2022 the government estimated a growth rate of 4.5%. The year, however, based on its preliminary data ELSTAT closed with a growth of 5.9%, a fact that of course had a huge impact on revenues.

Aided by the boom in e-transactions, the excess in VAT revenues reached €2.67 billion. €2 billion was the excess from income tax, while in 2022 the state collected €1.6 billion more in insurance contributions than in 2021, a result of course of the significant increase in employment.

We also had better results in terms of expenses, and here the de-escalation of energy prices at the end of the year helped significantly. The initial estimate in the 2022 budget was for spending of €65.6bn, with revisions reaching €73.25bn in the draft 2023 budget to end the year around €2bn lower.

Someone will say, but all this doesn’t make €3.5 billion, but much more, and will wonder why we don’t have a much higher surplus. The answer is that these impressive results were achieved while the government throughout 2022 took measures to support households and businesses in the face of the twin crises of energy and the pandemic with a net fiscal cost of €9.2 billion (an additional €5.2 billion was financed by the Energy Transition Fund).

Regardless of what eventually closes the 2022 primary result, the figures show – and as long as the country does not lose much time with the electoral process – that it is very easy to achieve the fiscal target this year with the threshold set at a surplus of 0.7%. And not only that, but during the year fiscal space will be created for further reductions in taxes and burdens and support for the weakest.

The fiscal stability of the country and the achievement of the goals are music to the ears of the markets. In addition to the government, the president of the Eurogroup, Pascal Donohiou, estimated that before the end of his term, Greece will regain investment status. The government is talking about an upgrade from the rating agencies after the elections (and if a strong government emerges, as Kyriakos Mitsotakis put it). Unless Standard&Poor’s, which decides on April 21, has a different opinion.