Budget approved, lenders wary

Creditors concerned by coalition’s policy regarding handouts, Mitsotakis challenges clean exit claims

Parliament approved the 2018 budget last night following a clash between Prime Minister Alexis Tsipras and New Democracy chief Kyriakos Mitsotakis and amid concern on the part of Greece’s lenders about the handouts that the government has announced over the last few days.

Tsipras hailed the budget as the last Greece would have to execute while under an adjustment program. The SYRIZA leader argued that the country is already on the road to economic recovery and that this would continue next year.

“This year is the first with real growth after many years of recession,” he told Parliament.

Mitsotakis described the budget, which introduces almost 2 billion euros in new fiscal measures, as “unjust” and said it would undermine Greece’s growth prospects. He also labeled the government’s assertion that Greece would be exiting its bailout next year as “Mr Tsipras’s new big lie.” He argued that the coalition had already committed Greece to a fourth program.

Mitsotakis also accused the government of beating this year’s primary surplus target through high taxes, confiscations and the reduction in social and investment spending, rather than from the economy beating expectations.

“Why do we have to produce larger surpluses than those demanded by our creditors?” asked Mitsotakis, who accused the government of intentionally beating fiscal targets so it could engage in handouts, “copying the worst clientelistic methods” of the past.

The Finance Ministry also announced yesterday that plans to scrap the 30 percent reduction on value-added tax for numerous Aegean islands would be held off for another six months in places that are at the forefront of the refugee flows: Lesvos, Chios, Samos, Kos and Leros.

It is not clear if this change to the plan re- garding the VAT hike on islands has been approved by Greece’s lenders. Sources also suggested that the institutions are concerned by the scheme for the young unemployed. Although the total amount involved is relatively small at 20 million euros, the lenders are upset there is no provision for the handout to be means-tested, which could lead to young Greeks from well-off households receiving the benefit.

Sources also said the International Monetary Fund is annoyed by the government’s handouts and that the issue is due to be raised at a meeting of the IMF’s executive board in February.