September is a critical month for the economy

By Tasos Dasopoulos

September will be a month of feverish economic activity inside and outside Greece, since the necessary preparations will have to be made in view of a winter which will be demanding and difficult,

Inside Greece, the economic staff has announced a new large support package in the face of continuous fuel and food price hikes. With “reservoir” the excess of revenues due to indirect taxes and tourism that exceed 2 billion, but also the additional revenues from pollution rights, due to the re-operation of lignite units, the Ministry of Finance is preparing a package of 3 billion euros with interventions in electricity, liquid fuels, but also strengthening the income of the most economically vulnerable citizens.

This package will be one of the topics of discussion that the financial staff will have with the institutions, in the first evaluation after the end of the enhanced supervision, on August 21. The September evaluation will be in the context of the European economic semester and will also have an economic object for Greece.

Its success will lead to the disbursement of the last installment, amounting to 645 million euros, from the profits of the bonds, formally closing the regime of enhanced supervision. Other topics of discussion in this evaluation will be the final liquidation of red loans from the old Katseli law, the promotion of auctions and the liquidation to the banks of the forfeiture of public guarantees for private loans. Also, the zeroing of overdue public debts, pending pensions, progress in the land registry, and changes in Education and Justice will be discussed.

Within the month, the Ministry of Finance will officially request the second tranche from the Recovery Fund, which concerns grants of 1.97 billion euros, having completed the 25 milestones that accompany it. The tranche is expected to enter the public coffers before the end of the year.

The measures of 2023

At the same time, within the next month, the drafting of the 2023 Budget will be completed, where the economic policy for the following year will be described. The Budget is expected to include, in addition to returning the economy to a primary surplus and new interventions such as the abolition of the solidarity levy for the public and private sectors, increases for approximately 700,000 pensioners and – perhaps – provision for the payment of retroactive benefits and gifts , in implementation of the relevant decision of the Council of State.

In a more detailed form, the financial staff’s plans, as well as the forecasts up to 2026, will be included in the Medium-Term Fiscal Strategy Program (MFSP) 2023 – 2026, which is expected to be completed and sent to Brussels within the next month .

The international environment

All this, in an international environment which is expected to continue to deteriorate. Both EU countries and markets are waiting for the next episode of the Russian gas thriller, when the temperature in the European North starts to drop.

The ECB will normally proceed with the second consecutive increase in the euro’s key interest rates, in an attempt to contain inflation. The question is whether the second rate hike will also be 0.5% or will eventually be higher if deemed necessary.

Also, at the informal meeting of finance ministers in Prague, on September 9, the course of the EU economies in the midst of high inflation and the energy crisis, as well as the outlook for 2023, will be discussed.