The specter of new austerity measures to be imposed in 2019 — assuming gasping negotiations conclude over the now delayed second review of the Greek program — are likely to reach four billion euros, given that the package will be calculated as a percentage of that year’s GDP and not at the current level.
Moreover, according to the latest reports out of Athens and Brussels, new austerity measures – such as a looming reduction of the tax-free annual income threshold and further cuts in pension expenditures – are more-or-less a given. Conversely, implementation of so-called “countervailing measures”, which the embattled Greek government desperately wants in order to appease its grassroots supporters and keep its slim Parliament majority solid, appear linked to the achievement of future fiscal targets.
Beyond the figure of roughly four billion euros in austerity measures as of 2019, in order for countervailing measures to be implemented the primary budget surplus for the specific year could reach the stratospheric 5.5 percent of GDP — significantly up from the repeatedly cited target of 3.5 percent. The higher figure would ostensibly be needed in order to guarantee a “fiscal margin”.
Cutting pensions aim to slice 1 percent of GPD worth of expenditures for the sector, a figure calculated at above two billion euros annually, especially if personal income tax rates are cuts, as promised. To achieve savings of 2.0 to 2.2 billion euros in annual pension sector cuts, the average reduction in all benefits would be between 6 percent to 7 percent. If a 700-euro monthly social security benefit is picked as the threshold for implementing cuts, then benefits over that figure will have to be reduced by 10 percent, on average; 13 to 14 percent if the threshold is at the west European levels of 1,000 euros.
Additionally, the working “scenario” for fiscal targets is 3.5 percent of GDP for three years after 2018, or, 3 percent for five years.
