Measures by measure to deal with the pandemic and accuracy

By Tasos Dasopoulos

With a view to Brussels and the restrictions set by the European Commission, the support measures for 2022 will be adjusted to cover part of the loss of income from high inflation, as well as the restrictive measures for the pandemic.

The basic guideline set by the European Commission, especially for heavily indebted Member States such as Greece, is that this year the new support measures should only be aimed at meeting health needs and supporting work.

On this basis, the Ministry of Finance “defensively” addresses the excessive demands made by the various economic sectors (eg catering, entertainment and retail), which are affected either by the restrictive measures for the Omicron mutation or by price increases for energy products.

As is well known, Greece has received the praise of all international organizations for the timely and effective response to the effects of the coronavirus for the two years 2020-2021, supporting employment and business with a proportionately huge package of measures, of the order of 43.3 billion (the third largest within the EU), despite the budgetary impact on the deficit and debt.

The goals

In 2022 the game changes. The European Commission from the Eurogroup in December has sounded the alarm that in 2022 the support measures should be implemented in moderation. With a view to restoring fiscal rules – when and as decided – Member State governments should be careful about who and how much they rely on. They should also gradually begin withdrawing support measures as economies recover and reduce deficits and debt, which increased in the months of the pandemic.

Greece, having adopted a very large support package, had an increase in its debt by 26% of GDP, reaching 206.3% of GDP in 2020, with the prospect of decreasing by 9.2%, to 197.1% of GDP, in 2021. Its deficit, from a surplus of 1.3% of GDP in 2019, increased close to 10% of GDP in 2020 and remained at the same levels (having, in fact, a marginal increase) in 2021. In 2022 has committed to a reduction of its deficit by 10 billion euros (5.7% of GDP) and a further reduction of its debt by 7.5% of GDP, to 189.6% of GDP.

Based on the achievement of these fiscal targets, the European Commission will also set the guidelines in fiscal policy for 2023 by April, as it is almost impossible for the new fiscal rules to be decided and implemented before the end of the year. .

It is impossible to reduce taxes

All the above explain the categorical refusal of the Minister of Finance, Mr. Christos Staikouras, to open the dialogue for a temporary reduction of VAT rates on food, as a possible measure to curb the price increases already recorded by ELSTAT, but also those that are expected. to follow.

By the same token, the financial staff categorically refuses to open the issue of reducing the VAT on energy products, as demanded by the official opposition, but also a part of the market.

The costs of both of these interventions would be enormous (measured in the multibillion-dollar revenue loss) and the benefit would be questionable, as no one can yet say with certainty whether the price cycle is at the beginning, middle or end .

We would also have a consultation with the EU, which would result in a revision of the revenue targets and the basic budget figures of the Budget, and in fact from January of the new year. Such a thing would give anything but positive impressions to the contacts that are being made at the moment and for the early repayment of the old debts (to the IMF and the Eurozone countries) but also to the intention of Greece to leave the enhanced supervision regime up to in August.