“We are an open economy much more than 15 years ago. Half GDP of us (about 49%) comes from exports, up from 23% previously. And if one looks at the export mix, one will find that we are exporting more high-tech products, while despite wage increases competitiveness is not affected.”

This remark was made by an official of the Ministry of National Economy and Finance, on the sidelines of the submission to the Commission of the Stability Program, wanting to demonstrate that exports combined with tourism, shipping and the Recovery Fund, can lead the two years 2024-2025 to more than double the growth rates of the average euro zone. While the primary surplus target was better in 2023, it helps this year’s targets.

However, he does not ignore that the country is not in a “glass” and is naturally affected by the uncertainty that prevails in the European Union, the geopolitical developments in the international environment, as well as the high interest rates of the ECB, which also lead investors to restrained attitude.

In fact, that is, fiscal discipline is considered out of the blue if the country wishes to avoid unpleasant developments, such as an excessive deficit process. All the more so, as the Stability Program is considered “temporary” and the country will be asked at the end of September to submit to the Commission, like the other member states, an absolutely binding Medium-Term Program for the four years 2025-2028. Where the priority will be the cost containment and debt reduction.

In June, the European Commission will give four-year absolutely binding instructions (and regardless of any changes of government) to all member states on the limits of “net” expenses. At the same time, every year Brussels will inform the member states about what the increase in “net” primary costs should be in the following year. The increase will vary from country to country, and will result from a mathematical formula, which will be based on the Commission’s forecasts for GDP, inflation, etc. And if a country succeeds surpluswill not be able to dispose of it for tax breaks or income support, if this exceeds the annual expenditure increase limit.

From now on, based on the new rules, as the ministry official says, the fiscal space will be “measured” by the exclusive criterion of spending and will be created only if spending is cut or if fiscally equivalent tax increases are made. The European Commission will record whether a year’s expenditure growth is lower than the target or higher (with a maximum deviation of 0.3%). The discrepancies will be recorded in a “Special Account” (Control Account), which is already activated this year. If the country keeps spending below the target, the “cushion” will be able to cover spending overruns in the coming years, without disrupting fiscal targets and the prospect of debt reduction.

The only category of expenses with a separate status, the ministry agent points out, is that of defense spending. If the country deviates from the fiscal targets, defense spending will be defined as a factor that will be weighed in whether or not to submit to the excessive deficit procedure. “There will be no guarantee, but an understanding,” the specific official clarifies. Adding that “if you have missed the targets and it is not just defense spending that is to blame, an assessment will have to be made and Brussels will decide if the excessive deficit procedure is required. Of course we also have the issues of natural disasters.”

It is noted that this year is a special year, as the increased by 400 million euros from the budget forecasts (1 billion euros against 600 million euros) expenses for pension payments, will be compensated by the outperformance of the revenues. Based on the economic staff’s figures, about 30,000 more retirements are expected this year, which, according to the economic staff officials, also demonstrates the magnitude of the challenge to sustainably manage the insurance in the coming years.