EU to remind Athens of tasks
European Commission reports set to highlight need to return to tighter fiscal policy after crises
With its two reports on Greece on Wednesday – the second assessment after the end of enhanced surveillance and its recommendations in the context of the European Semester – the European Commission is bringing Athens back to European reality, which entails imposing tight fiscal policy and the acceleration of reforms, following the intense focus on the election.
Although both reports are now included in the framework of “normality,” as the European Semester concerns all EU countries, and the assessments are done for all those who joined bailout programs, they are especially important for Greece, as it is the most over-indebted country in the EU.
The Commission's recommendations, as expected by the Finance Ministry, will pave the way for the new Stability Pact, calling for a return to primary surpluses, which will make the debt sustainable. This translates into primary surpluses of 2-2.5% of GDP, from 2024 onward, quite close to the targets set by the government in the Stability Program, which it submitted to the European Commission at the end of April. Since the Commission estimated that the primary result this year will be 1.9% of GDP (from 0.1% of GDP in 2022) in its spring forecasts 10 days ago, the size of the adjustment that will need to be made in 2024 is not that big.
Still, the government had set a primary surplus target of 0.7% of GDP, although in the Stability Program it envisaged 1.1% of GDP, so that it has room for more support measures until the end of the year. The program notes that the estimate for a surplus of 1.1% of GDP “does not take into account unforeseen expenses or post-election measures that may arise during the year.”
The Commission, however, is expected on Wednesday to call on member-states, including Greece, to gradually withdraw support measures against energy hikes, given that energy rates have fallen. In the event that fresh support is needed, it should be directed only to the financially challenged, according to the Commission's guidelines.