The Ministry of Education and Science enters into a mode of ‘fiscal contraction’

By Tasos Dasopoulos

Additional spending only for the “essentials” is the rule that seems to be adopted by the Ministry of Finance, wanting 2022 to be a year of fiscal stabilization, so that in 2023 the economy will have a “smooth landing” in the restoration of fiscal rules.

Following the data published by ELSTAT for the third quarter, it is now a given that the growth rate of the economy will be significantly higher than the 6.9% which is the official forecast in the 2022 budget. Greater growth means potentially greater fiscal space for new positive interventions, and somewhere somewhere expectations have already begun to be cultivated.

However, competent sources in the Ministry of Finance emphasize that 2022 will be a budget year, during which both the budget and the primary deficit will have to be reduced by 6% of GDP and is “a goal that must be achieved”. , as they characteristically emphasize. Therefore, even if there is additional budgetary space, it will remain as a reserve to meet any needs from the continuation of the pandemic but also the additional support to businesses and households to curb part of the increases in electricity, gas and heating oil. .

This feeling was given by the Prime Minister himself during his interview with the Free Press, ruling out new fiscal interventions but not a new subsidy for the appreciation of energy products.

Another area that is expected to have deviations, which should not affect the deficit, is the public investment program. An element of uncertainty emerged from the end of the 2014-2020 programming period. In particular, recently there was an issue with a number of technical projects of the NSRF, which were delayed in payment because their execution was beyond what was provided for in the budget. The same can happen in 2022, as it will be a year of intense activity for public investment. This is because next year the NSRF 2014-2020 will be completed, the NSRF 2021-2027 will start and the Recovery Fund will increase its speed, both through subsidies and through loans.

Uncertainty about goals as well

The restraint shown by the Ministry of Finance is due to the fact that there is still no clear landscape from Brussels. As is well known, the medium-term plans for 2022, ie the revised Stability and Growth Plans and the new Medium-Term Plan, for all Member States and for Greece, will be based on provisional guidelines to be published by the European Commission by April.

At this stage, Greece should not deviate from the fiscal targets it has stated in the draft budget it sent to Brussels. This would reopen the debate on restrictions, something far from desirable.

A second element that requires fiscal restraint is the fact that the debate on changing fiscal rules will begin next year, and it is unknown whether it will be completed by the end of the year. In order to intervene in the debate, Greece must prove that the increase in debt and deficits was a result of the pandemic and that in 2022 it returns to fiscal 2019.

The Ministry of Finance wants the 2023 adjustment to have progressed so that Greece can pass the criteria of the existing agreement as soon as the package of changes is finalized and institutionalized.

In addition to the general changes, Greece should be confident about the goals it should achieve, due to its high debt, especially in a year when it wants to break free from the regime of enhanced supervision.