Circular: Half of projected primary budget surplus in 2019 from social security sector; pension cuts assured

Thursday, 19 July 2018 11:23

Ελληνική σημαία έχει μπλεχτεί σε καλδιά δέντρου εξαιτίας του αέρα έξω από κτήριο στην πόλη των Τρικάλων. (EUROKINISSI/ΘΑΝΑΣΗΣ ΚΑΛΛΙΑΡΑΣ)

The now closely monitored process to draft Greece's 2019 budget has more-or-less official begun, as an urgently issued circular by the alternate finance minister this week calls on all entities falling under the general government to send data on their expected revenues and expenditures for the coming year - a process that has a deadline by the end of the month.

By all accounts, the finance ministry will aim for a primary budget surplus nearing or exceeding 4 percent of GDP for 2019, higher even than the 3.5 percent target the Tsipras government has pledged to creditors - in writing - that it will achieve.

The ambitious fiscal target, unprecedented by modern Greek standards, is necessary to create what the poll-trailing coalition government calls "fiscal space", i.e. extra cash from high revenue collection and tight spending in order to finance tax breaks already announced by Greek PM Alexis Tsipras.

The leftist prime minister and a bevy of top ministers have promised tax breaks in 2019 valued at up to 700 million euros, as the year coincides with a scheduled general election and with ruling SYRIZA party trailing the main opposition party by double-digit percentage points in practically all mainstream opinion polls for more than a year now.

According to the "fine print" in the circular, bearing the signature of Alternate FinMin Giorgios Chouliarakis, the greatest burden for achieving the high primary budget surplus target in 2019 will fall on pension funds, especially the memorandum-mandated umbrella social security entity, EFKA.

The latter, as shown in detailed tables in the circular, must accumulate a surplus of 3.278 billion euros. Given that with current figures a 3.5 percent primary budget surplus (as a percentage of 2019's GDP) translates into 6.65 billion euros, meaning that roughly half of the overall annual fiscal goal for the year must come from the social security sector.

The figures have been calculated to include foreseen cuts to approximately 30 percent of all social security beneficiaries in the country, an austerity measure passed in 2016 and set for implementation on Jan. 1, 2019. The measure is forecast to slice 2.7 billion euros from the state's spending for social security.

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