The Ministry of Finance is looking for a new fiscal space

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By Tasos Dasopoulos

The scope for fiscal divergences is now extremely limited, with the aim of new support measures following the strict recommendations coming from Brussels, to focus on spending and rapid fiscal adjustment, especially for countries with high debt such as Greece.

The margin given by the excess of tax revenues by 2 billion euros in 2021, was exhausted by the interventions that have been implemented or will be implemented in the next period: The intervention package of April (fuel subsidy, precision check diesel) at a cost of 490 million, the extension of low rates in tourism, catering, transport, theaters, cinemas, gyms at a cost of 280 million euros, the budget cost of 200 million euros to reduce ENFIA and more recently, the budget contribution with 1 billion euros, in the intervention for the electricity tariffs.

In fact, the use of these resources led to the revision for this year of the primary deficit from 1.4% of GDP projected in the 2022 budget, to 2% of GDP entered as a forecast, in the Stability Program already sent to Brussels.

Now, any new intervention would lead to a new review of the deficit, which is not very prudent in the current economic environment.

Budget space from savings

The new fiscal space invoked by the leadership of YPOIK, will emerge only if some of the measures that have already been implemented or are to be implemented, ultimately cost less than had been calculated.

According to competent sources of YPOIK, the intervention for electricity had as a basic assumption that the price of natural gas would be over 100 euros per megawatt hour by the end of the year.

In recent days, the price of gas has fallen to 85-87 euros per megawatt hour. Ideally, if the price stays at this level until the end of the year, there will be an amount of 350 – 400 million euros available that can be allocated for new support measures. Of course, this method requires constant, close monitoring of prices, so that everyone knows at any given time what the margins are for new interventions.

Measures by the month

By that logic, if there is a margin, it will lead to measures that will be repeated every month and not every quarter as is the case with the measures adopted in April. Regarding the type of measures that will be implemented, YPOIK plans in principle the expansion of the existing ones with some modifications. Particularly:

The fuel subsidy from 40 to 55 euros is expected to be repeated, which in its current form, is valid until the end of June. From July, if there is a margin, a smaller monthly amount will be given which will follow in height, the price increases of liquid fuels.

The same will apply to the special subsidy for diesel, which may increase from 15 to 20 cents per liter at the refinery price and will probably be extended until the end of the year, since in addition to households, it also concerns all small and medium-sized enterprises.

The financial staff will be more concerned with the issue of further strengthening the financially vulnerable. This is because they are under double pressure from rising prices for energy products, as well as food. Because such an intervention will also depend on the course of fuel and food prices, it will be considered at the end of the summer.


Source: Capital

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