Following the announcement of the superpowers by the Greek Statistical Authority – which finally reached 1.45 billion euros well above the value of 889 million euros – the finance minister met with the prime minister at the Maximis mansion.
The mandate of the Minister of Finance was clear: "Euclid, let's give as much as we can."
In fact, Tsipras called for the plan to be drafted immediately and make official announcements within the next few days, of course the polls in the 2016 European elections.
What will be the plan? Benefit package, social dividend, tax deductions, 120 installments, etc.
The finalization of the Greek proposal to use "fiscal space" is a priority, since immediately after Easter precise measures must be presented to the institutions and quantified to review the targets set in the medium-term fiscal strategy program. The latter must be presented to the House in May and, in any case, before the European elections.
Based on the project so far, the measures will be grouped into two groups:
1. Measures of a permanent nature which will be activated immediately after Easter, but will be implemented in the coming years.
Among the proposals presented in this context are:
- the reduction of VAT rates (from 24% to 13% today),
- the transfer of products and services from the high rate to the low rate,
- the reduction of excise duty on fuel,
- but also to accelerate the reduction of the minimum rate of the current 22%
2. One-off measures These are interventions that will affect the 2019 budget, but not the next budgets.
The list of one-off measures includes:
- the payment of a period of 15 days to state employees and pensioners (as an Easter gift).
- the payment of retroactive payments to pensioners for the period from June 2015 to May 2016. This "benefit" will have a double benefit to the economic team, as it will appear to directly support the income of hundreds of thousands of retirees and, same time to close a large tax booth.
Reactions of institutions
The sudden discovery of extra fiscal space by the government, as reflected in the 2019 National Reform Program in Brussels, will be examined in the EuroWorking Group on 2 May.
The first reactions are quite negative, in the sense that there is concern about the under-execution of public expenditures, especially for cuts in the Public Investment Program.
The latest forecast by the Treasury on the value of this year's surplus indicates new pre-election bonus benefits of € 1.1 billion directly within the next few weeks and promises of billions for the next three years.
The projections under the National Reform Program refer to a primary surplus of 4.1% of GDP this year, according to the methodology for calculating the program (4.7% of GDP according to Eurostat methodology), when the official projection of the The budget concerned a primary surplus of 3.6% of GDP.
The difference of half a percentage point translates into a fiscal area of over 1.1 billion, compared to the primary surplus target of 3.5% of GDP, and the government has already announced announcements within days of permanent measures and one- off, here and now.
However, as surpluses rise, the growth rate of the Greek economy is falling more and more. The growth target of 2.5% for this year has already been revised to 2.3%, a growth rate expected by the Ministry of Finance for 2020, before falling to 2.1% in 2021 and 2% in 2022.
The primary surplus is also projected at 4% of GDP by 2020, before continuing to rise to 4.2% of GDP in 2021 and 4.6% of GDP in 2022 (in Eurostat terms).
With these forecasting data, the government can argue that in the coming years there will be a benefit and reduction budget of between 1 and 2 billion euros, bringing the primary surplus closer to the 3.5% of GDP target.
The National Reform Program states that "positive fiscal performance is expected to remain in the medium term, creating fiscal space to change the fiscal policy mix in order to foster economic growth and social welfare."