The escape clause for Greece with a financial ‘cutter’

By Tasos Dasopoulos

Competent sources of the Ministry of Foreign Affairs characterize the expected extension of the total escape clause for 2023 as more than a good development, since Greece – and other countries with high debt – will have to follow a tight fiscal policy even for support measures against accuracy.

This signal was sent yesterday by the Italian commissioner in charge of economic affairs, Mr. Paolo Gentiloni. In announcing the Commission’s spring assessments, he openly said that Greece and other countries with high debt should be very careful with support measures financed with national resources.

A short time later, a source in charge of the financial staff admitted that the slip of the euro, due to rising interest rates in the US and rising international prices for crude oil, are increasing the price of liquid fuels more rapidly. However, they made it clear that at this stage, after the large intervention of 3.2 billion euros that was recently announced and will start to be implemented in June, there is no room for a new intervention that will mitigate the prices of gasoline and diesel. .

The new support measures are difficult

Theoretically, the hands of the financial staff would solve a decision at European level that would allow spending on support measures, which would not be counted in part or in full, in the deficit and debt. However, the financial staff estimates that such a decision, especially for countries with high debt, could lead to complete fiscal derailments. Therefore no one in Brussels will raise such an issue in the Eurogroup on the 23rd of the month. This despite the fact that at the forthcoming meeting of Eurozone finance ministers, it was decided to review the guidelines announced in March by the Commission for the 2023 budgets.

With these data, the margin for new support measures can be considered only if the performance of the economy exceeds that of 2021, when tax revenues were increased by 2 billion euros. If, like in 2021, the overperformance of the economy gives room to achieve this year’s fiscal targets and at the same time there is a “surplus” of revenues, then, in consultation with the institutions, there may be room for new support measures.

The permanence of emergency measures

Another serious problem posed by the extension of the suspension of fiscal rules for one year is the difficulty in perpetuating the emergency measures that were initially implemented in 2021 and are being implemented this year as well.

This is to make the reduction of insurance contributions permanent by 3% and the abolition of the special solidarity fee for the public and private sectors. A total intervention with a budget cost of about 2 billion euros. These two measures have the support of the Commission, since in the part of the spring forecast for Greece, the Commission emphasizes that its implementation has increased employment and supported incomes.

However, their permanence in the “electoral” 2023 finds itself facing the overall escape clause which prohibits the adoption of permanent measures at a budgetary cost of more than 0.1-0.2% of GDP. At best, this creates in the financial staff the obligation of new consultation with the institutions so that these two measures can be implemented as an emergency in 2023.