By Chrysostomos Tsoufis

The Ministry of Finance is trying to build “reserves” for the future by trying to use every bit of space left by the fiscal corset that Brussels has been putting on it since this year.

So the stability program was sent to Commission anticipating additional support measures for the two years 2024-2025 amounting to €2.5 billion. €1.7 billion for this year (new salary in the State, increases in pensions, increase in the tax-free allowance for families with children, among others), as well as the €880 million announced by Kostis Hatzidakis from the Delphi forum.

That is:

– Pension increases
– The abolition of the pretense fee
-The reduction of insurance contributions by 0.5%
– The extension of the VAT suspension in construction
– The increase in the student allowance
-The permanence of the new method of return to agricultural oil.

Apart from these, apparently nothing. The technocratic reason has to do with the new fiscal rules that apply, according to which the central role is no longer what you receive, but what you spend. So whenever there is a revenue outperformance we should all be “educated” not to expect bonanzas as the extra revenue should be used to reduce debt.

In June, Greece will know the limit that it will be able to increase its spending for the period 2025 – 2028. This year’s budget foresees an increase of 2.1% (that is, to €100 billion, €2.1 billion). If the limit is set for this year at 2.5%, let’s say, and the budget is executed smoothly, there will be a space of 0.4 units to be used, which will be registered in the “account” of each country and the respective government will decide whether to keep it or not yield.

If the budget not run smoothly and result in a 2.7% increase in costs e.g. , and this small discrepancy is recorded in the country’s account with the note that it must be “equalized” the following year. A deviation of more than 0.3 points puts the country under the “microscope” of the community authorities, given that specific primary surpluses must be achieved every year.

The other way of taking support measures is to take equal measures from the revenue side, i.e. to increase taxes.

The second reason is political. This possibility that exists to register in the piggy banks of a country the fiscal spaces that may arise, gives the possibility to a government during the 4-year electoral cycle, to be “frugal” in the first 2 years and “wasteful” in the next 2 in order to increase her re-election hopes. So, at the Ministry of Finance, they are trying to close any benefit windows for the time being.

In all this there is also the element of uncertainty. In the stability program the growth rate is revised downwards, to 2.5% from 2.9% foreseen in the budget. The main reason is the equal revision of the eurozone growth from 1.2% to 0.8%.

Additional “burdens” are the high interest rates, the impact of which was initially underestimated, but is now “unfolding” in all its glory. It is characteristic that the IMF predicts an increase in investments in Eurozone this year only 0.1% while the ECB estimates a contraction.

In this context, the funds from the Stability Fund become particularly important, without which the country’s growth rate would barely exceed 1% this year. According to the estimates of the Ministry of Finance, in the three years 2024-2026, loan agreements for the financing of €13.1 billion projects are expected, which will give an impetus to the growth rate.