By Tasos Dasopoulos
The financial staff must be in a constant race to ensure this year, but also for 2023, the overperformance of the economy, so that it can support the economy and continue the policy of reducing taxes and contributions.
The extension of the total escape clause for 2023, which will be announced in the Eurogroup on Monday, changes the scenario for the extension and permanence of the measure, the abolition of the special solidarity contribution in public and private sector, but also the permanent reduction of insurance contributions by 3% in “electoral” 2023, accelerating political developments and perhaps the timing of elections.
This is because the suspension of fiscal rules does not allow Member States to implement permanent measures at a budgetary cost of more than 0.1% – 0.2% of GDP. The suspension of the special solidarity contribution for the private sector and the reduction of insurance contributions are two measures with a total cost of 1.6 billion euros which were first implemented in 2021 and are applied again this year as emergency measures to support the economy against the pandemic . The abolition of the solidarity levy for the private and public sectors raises the cost of the measure from 750m euros to 1.2 billion euros. Together with the 850 million euros that the reduction of insurance contributions costs, they would be permanent measures with a total cost of 2.1 billion, for which the financial staff would have to find the appropriate fiscal space. However, with the extension of the suspension of the fiscal rules, the financial staff will have to negotiate again with the institutions, in order for them to continue in force in 2023, again as extraordinary ones. At the same time, the extension of the suspension of the solidarity contribution to the State (although the courts have initiated legal proceedings) and the pensioners is postponed. This is given that in the spring estimates of the Commission and in the part for Greece the usefulness of the measures for growth and employment is subscribed but, it is noted, that these measures were planned to cease to be valid at the end of 2022.
The deceleration is growing
But before we reach 2023, 2022 must end without significant losses for the economy due to the crisis posed by high inflation in fuel and food and uncertainty about energy efficiency since the war in Ukraine. Brussels now has a better picture of the serious impact of the energy crisis on the European economy. Indicative is the revision of the growth slowdown in the EU. and Eurozone from 1% in March to 1.5% in the Commission’s spring estimates. What ‘s worse is that, according to Community circles, the revision of the spring estimates will probably not be the last for this year. With these data, the last objections that existed were removed and now, the Council of Finance Ministers of the Eurozone is expected, on Monday, to decide the suspension of the fiscal rules for another year.
European cutter in support measures
At the same time, the continuation of the suspension of the fiscal rules brings another problem in the fiscal management of 2022 for Greece and the other countries with high debt and concerns the measures they want to implement to support their economies against accuracy. The Commissioner for Economic Affairs, Mr. Paolo Gentiloni, sent the relevant message during the presentation of the spring estimates. Responding to a question, he stressed that Greece and other countries with high debt should pay special attention to support measures financed with national resources.
This clear message is in line with the assessment of the Ministry of Finance that given the current situation and pending the new suspension of fiscal rules for the fourth consecutive year, the margins will be tight. This is because Brussels has the task of closely monitoring the expenditures of the heavily indebted countries, so that there is no fiscal derailment for the entire Eurozone.
Support only with national policies
While the Commission is essentially putting a brake on “national support measures”, it is not facilitating action even with common European resources. This is evidenced by the 300 billion-euro Repower EU program announced on Wednesday, which is aimed at building infrastructure for the transition to “green” electricity generation, but has no money for measures to support the real economy.
However, Greece has preceded the developments and has proceeded with the announcement of the implementation of the large intervention of 3.2 billion in electricity tariffs. The program aims to make up for some of the losses from the revaluations from the beginning of the year and to reduce tariffs on a permanent basis at least until the end of 2022. The program followed the tariff subsidies of about 3 billion euros that started from in November 2021 and most recently the measures amounting to 490 million euros for the financially vulnerable and included the precision check, the fuel subsidy, the special subsidy for diesel and the 200 euro bonus for taxis.
After the intervention for the electricity tariffs, the executives of the financial staff clarify that at the moment there is no room for new support measures. The question is whether there will be a new margin in the near future.
With the strategy followed by the financial staff in 2021, it has set a conservative goal for growth of 3.1% this year, while it continues to estimate that the tourism turnover for this season will not exceed 85% of 2019. This despite the fact that The European Commission expects to grow by 3.5% this year with tourism recovering 100% – if not more than the record turnover of 18 billion in 2019.
With the new data, it is almost certain that the economy will over-perform another year in the summer. But even if they have higher tax revenues, the question will be whether we will want to make a new supplementary budget and – most importantly – whether we will revise for the second time the target for the primary deficit that according to the Stability Program will reach 2% of GDP for this year compared to 1.4% of GDP projected in the budget.