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Fitch ‘warning bell’ over recent loosening of Greek fiscal ‘strings’

The abruptly announced loosening of fiscal discipline by the Greek government last week – modest tax breaks, a lowering of certain VAT rates and the reinstitution of a pension bonus – sounded the first “warning bells” by an international credit ratings firm, with Fitch on Monday saying the development increases uncertainty.

“Uncertainty”, in this case, is over Athens’ stance in the medium-term, with an added caveat over a possible fallout between the hard left Tsipras government and its European creditors.

According to Fitch, what it calls pre-election benefits represent a major about-face from agreed to reforms, making future Greek governments’ efforts to balance fiscal policy with meeting fiscal targets all the much more difficult.

The credit rating agency details the measures announced by Greek PM Alexis Tsipras on May 7, estimating the cost for state coffers at 1.1 billion euros (0.6 percent of GDP) for 2019 and rising to 3.4 billion euros (1.9 percent of GDP) for 2020.