Fiscal targets a priority

Finance Ministry drafting study on lower post-2018 primary surplus before review

The Finance Ministry is preparing a study it plans to show Greece’s lenders when representatives return to Athens in September for the start of the next bailout review that proves Greek fiscal targets can be lowered without it leading to any extra costs for eurozone member states.

Kathimerini understands that the report, which officials hope to have ready by the end of August, will set out that it is possible for Greece’s primary surplus targets to be lower than 3.5 percent of gross domestic product from 2018 onwards, while maintaining the country’s funding needs at below 15 percent of GDP each year. Athens is expected to argue that lowering the target to 2.5 percent of GDP will release some 3 billion euros that the government could use for public investment or reduction in taxes, which would help the economy grow.

In a recent interview with Skai TV, Prime Minister Alexis Tsipras said “no economy can sustain a 3.5 percent surplus” over an extended period of time and suggested that he might try to persuade the institutions to reduce the post2018 target to between 1.5 and 2 percent.

However, European Economic and Monetary Affairs Commissioner Pierre Moscovici warned during his visit to Athens last week that now is not the appropriate time for the Greek government to be raising the issue of fiscal targets. It is thought that US Treasury Secretary Jacob Lew made a similar observation when he held talks with Tsipras and Finance Minister Euclid Tsakalotos, also last week.

It seems that Athens appreciates that it would not be wise to make a fuss over the matter while the eurozone’s focus is on the impact of Brexit and the problems with the Italian banks.

Kathimerini understands that Athens may be willing to offer bolder public sector reforms, such as a reduction of the so-called “special” wage categories in the civil service and the possible closure of some agencies, in exchange for concessions from its lenders on the primary surplus targets.