Bailout mea­sures worth 31 pct of GDP

Kathimerini English - - Front Page - BY SOTIRIS NIKAS

Greece has taken mea­sures worth al­most 63 bil­lion eu­ros since en­ter­ing the bailout era back in 2010, through which it has achieved a fis­cal ad­just­ment of 27 bil­lion eu­ros, ac­cord­ing to data pre­sented to the in­ter­na­tional press this week by Fi­nance Min­is­ter Yan­nis Stournaras on the oc­ca­sion of Greece as­sum­ing the ro­tat­ing pres­i­dency of the Euro­pean Coun­cil.

These mea­sures, in­clud­ing those al­ready voted for 2014, are al­most evenly spread be­tween ex­pen­di­ture cuts and rev­enue hikes, mak­ing Greece the coun­try with the great­est fis­cal ad­just­ment in the eu­ro­zone.

In the five years from 2010 to 2014 in­clu­sive, Greece has taken mea­sures worth 31 per­cent of the coun­try’s gross do­mes­tic prod­uct, or 62.92 bil­lion eu­ros. The pro­gram has proved to be front-heavy, as the year with the most mea­sures was 2010, when they to­taled 19.07 bil­lion eu­ros, or 8.6 per­cent of GDP. In 2011 the mea­sures amounted to 18.24 bil­lion, or 8.8 per­cent of GDP, which was on the wane. The mea­sures adopted have had a di­rect im­pact on the econ­omy, with GDP shrink­ing from 231 bil­lion eu­ros in 2009 to 222 bil­lion in 2010 and 208.5 bil­lion in 2011.

Over time, the need – as well as the scope – for new mea­sures has de­creased, with the small­est mea­sures taken for 2014 (3.86 per­cent). How­ever it was in 2013 that a ma­jor change to the fis­cal pol­icy mix oc­curred: While from 2010 to 2012 Greek gov­ern­ments took more mea­sures in­creas­ing taxes than cut­ting spend­ing, the cur­rent govern­ment de­cided last year to dras­ti­cally re­duce state ex­pen­di­ture and in­crease its rev­enues to a lesser de­gree. Con­se­quently, in 2010, Greece took mea­sures cut­ting spend­ing by 8.35 bil­lion eu­ros and boost­ing rev­enues by 10.72 bil­lion, while in 2013 spend­ing was cut by 8.09 bil­lion while the tar­geted rev­enue growth was just 2.13 bil­lion. The same pol­icy is con­tin­u­ing in 2014. In to­tal, from 2010 to 2014, ex­pen­di­ture mea­sures amounted

pre­sented data point­ing to the con­clu­sion that for ev­ery 1 bil­lion eu­ros’ worth of mea­sures Greece takes, its pri­mary sur­plus im­proves by 430 mil­lion eu­ros. They also prove that the im­pact of the re­ces­sion has been greater than ex­pected in the ef­fort to stream­line the coun­try’s pub­lic fi­nances. to 33.31 bil­lion eu­ros while those to in­crease rev­enues came to 29.61 bil­lion eu­ros.

The fig­ures point to the con­clu­sion that for ev­ery 1 bil­lion eu­ros’ worth of mea­sures Greece takes, its pri­mary sur­plus im­proves by 430 mil­lion eu­ros. They also prove that the im­pact of the re­ces­sion has been greater than ex­pected in the ef­fort to stream­line the coun­try’s pub­lic fi­nances, as a large part of the mea­sures taken have not fetched the an­tic­i­pated re­sults – i.e. the well-known prob­lem of the fis­cal mul­ti­pli­ers that were not cal­cu­lated cor­rectly at the start of the stream­lin­ing process.

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