Chr. Staikouras: The resilience of the Greek economy is strong despite the expected losses due to the energy crisis

The Greek economy is showing strong resilience and despite the expected losses that exist – as well as the whole of Europe – due to the energy crisis, it is estimated that it will show a growth rate higher than the European average, both for 2022 and 2023. This said the Minister of Finance Christos Staikouras, presenting to the cabinet the course of the economy entitled “Greek Economy. Great resilience – Strong dynamics”.

According to the minister, the per capita gross domestic product increased by 3.5% (in the eurozone 1.9%), unemployment continues to decline and the country appears champion in Europe for the three years 2021-2023 in investment (with double-digit increase in fact investments for 2021 and 2022) and exports. At the same time, public debt is declining significantly and the fiscal balance is gradually being restored.

Based on the presentation, the main reasons for the great resilience and strong dynamics of the economy are:

1. The implementation of structural changes and reforms.

2. The reductions of taxes / insurance contributions and the introduction of tax incentives.

3. Measures to support households and businesses.

4. The insightful publishing strategy.

5. The disbursement of resources of the Recovery and Resilience Fund.

6. Reliability and trust in the economic policy pursued.

The Minister made special reference to the reductions in taxes and insurance contributions, which are as follows:

-Reduction of ENFIA by 35% in the period 2018-2022.

-Reduction of the import tax rate on individuals from 22% to 9%.

-Reduction of the corporate tax rate from 29% to 22%.

-Reduction of the withholding tax rate for dividends from 10% to 5%.

-Reduction of the tax advance for natural persons engaged in business activity from 100% to 55% and for legal entities from 100% to 80%.

-Reduction of insurance contributions by 4 percentage points.

-Low tax rate for all agricultural schemes (10%).

-Permanence of the reduced by 30% VAT rates in 5 Greek islands (Kos, Leros, Lesvos, Samos and Chios), as long as there will be structures of asylum seekers in them.

Abolition of a special solidarity contribution for the income from paid work in the private sector.

-Reduction of VAT rates in catering, transport, etc., until the end of 2022.

At the same time, the following tax incentives were introduced:

-Reduction, by 50%, of the tax rate for start-ups for the first 3 years of operation.

Establishment of a tax deduction for expenses related to the receipt of services for energy, functional and aesthetic upgrade of buildings.

-Suspension of VAT on new buildings and suspension of real estate capital gains tax for 3 years.

Formation of a special regime of alternative taxation of income that arises abroad for investors, retirees, Greeks who left during the crisis years and companies for the special purpose of managing family property.

Establishment of tax incentives for business development, through partnerships and corporate transformations (income tax deduction of 30% for 9 years in the new partnership, which amounts to 50% for farmers).

Establish incentives to strengthen electronic transactions.

Mr. Staikouras also referred to the new challenges from now on, which lead to major revisions in the hands of inflation.

However, he also spoke about 5 [+1] “lines of defense” to address the problem:

Line 1: The 43 billion euro support measures of the previous period, which boosted the disposable income of the citizen and reduced unemployment.

Line 2: The continuous and permanent reductions of taxes and insurance contributions, which stimulate the disposable income of households and businesses.

Line 3: Subsidies of part of the increased energy costs to households and businesses, mainly the most vulnerable, amounting to 3.5 billion euros until recently.

Line 4: Aid to vulnerable households, primary sector support and fuel subsidies, amounting to € 900 million to date.

5th Line: The double increase of the minimum wage in 2022, of a total percentage of 9.7% (11.8% if the reduction of employees’ insurance contributions is taken into account).

And the 6th “line of defense”:

-Significant increase and brave expansion of electricity subsidies for the months of May and June, to households and businesses (900 million euros).

– Retroactive subsidy of 60% of the increased electricity costs that consumers have been charged for bills issued from December 2021 to May 2022, with a maximum of 600 euros (280 million euros).

-Continuation of the subsidy of the selling price of diesel at source, for the months of May and June (45 million euros).

-Strengthening the mechanism of discounts on electricity tariffs horizontally from July 2022 and with a time horizon of up to one year, in order to stabilize the retail price at certain levels, significantly lower than in previous months and slightly higher than before the crisis (2 billion).

In conclusion, according to the presentation: The Greek economy has strong resilience and shows stable dynamics. The new crisis creates additional difficulties, but will not lead to irreversible situations. The crisis significantly affects the budgets of the citizens, which is why the support of the state is brave, even higher than the European average. The prospects of the Greek economy are “blurred”, but remain auspicious.