Reining in expenditure again
Brussels tells Athens it can spend only 2.6% more in 2023 than what it does this year
Wednesday's recommendations by the European Commission signal a return to fiscal containment, in view of the adoption of a new Stability Pact, as they limit the increase in the so-called net primary costs of 2024 to 2.6% compared to 2023.
At the same time, the Commission calls on the Greek government to address a series of chronic weaknesses in the Greek economy, which it highlights in detail, such as tax evasion, especially among the self-employed, and the low efficiency of the public sector, while it warns about the widening current account deficit and any impending difficulties in absorbing the resources of the Recovery Fund.
In the separate text of the second post-bailout surveillance report, moreover, the Commission acknowledges the significant progress in the economy, in terms of growth, fiscal performance and the banking sector, but points out some delays: While the overdue debts in main pensions were almost cleared, the rest of the pension targets have not been achieved.
Brussels severely criticizes the government's decision on the new regulation of public debts, pointing out that this can undermine the credibility of the fixed installment scheme and is detrimental to the payment culture.
The 2.6% net primary expenditure growth limit is covered, based on the Stability Program submitted by the government, if the additional pre-election measures announced after its submission to the Commission at the end of April are taken into account, sources from the outgoing Finance Ministry leadership said.
The importance the Commission attaches to the restoration of fiscal discipline is shown by the fact that its first recommendation to Greece is to abolish the support measures against energy hikes by end-2023 and indeed use the resources it will save to reduce the fiscal deficit. It is clear that the Commission wants any fiscal space to be used for better budget results and not for benefits. If energy rates rise again, support measures can be taken, but only for vulnerable households and businesses.