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By the end of next month, the government must complete 66 prior actions. By the end of the year, 95 of these key deliverables will have to be wrapped up if the commitments made to Greece’s lenders are to be fulfilled.
There is no denying that this is a tall order, especially if the government is to achieve its goal of completing the upcoming review, the third of Greece’s third program, as quickly as possible so that it will be in a position to conduct another bond issue in the months ahead.
The prior actions include a range of interventions in the public administration and on the privatizations front, product market reforms and adjustments to social benefits.
On top of that, the government has to use up 800 million euros from the last bailout tranche it received to reduce state arrears, which stood at 5.1 billion euros at the end of June. Athens has to add another 400 million euros of its own funds to this so that arrears are reduced by a total of 1.2 billion euros. Without this reduction, Greece will not be able to claim another 800 million euros that the European Stability Mechanism is set to disburse for the further payment of arrears.
Limited progress has been made since the last review was completed on June 15 and a great deal of work lies ahead for the coalition. The history of program reviews since 2010 is littered with Greek governments expressing their best intentions and promising swift action but rarely being able to live up to such ambitions. So Athens will really have to pull out all the stops this autumn for the assessment by the institutions be completed on time.
This race against the clock is only part of the story that we will be following in what is left of 2017. The other nail-biter is whether the economy meets, or even exceeds, expectations and, consequently, whether the budget will be on track.
Greece has to achieve a primary surplus target of 1.75 percent of GDP, or more than 3 billion euros, this year.
Preliminary budget execution data published last Monday indicated that on the face of it, Athens is on track to achieve this target. The budget primary balance at the end of July was 3.05 billion euros, which was 12.4 percent higher than during the same seven-month period last year. It was also 955 million euros above the end-July target.
However, the figures published by the Finance Ministry show that this was exclusively achieved through reduced spending as revenues were below their target. Net revenues for the first seven months of the year amounted to 26.2 billion, which was 656 million, or 2.4 percent, below the target. Primary expenditure, though, stood at 23.1 billion euros at the end of July, which was around 1 billion euros below the target. The ministry said that it had held back spending on hospitals, social security and family allowances, among other things.
This rang a few alarm bells as July was the month in which the first installment of extra income tax was due. Figures from the Independent Authority for Public Revenue suggest that around one in three of the taxpayers in question, or some 671,000 in total, failed to make this first payment, which led to a total of about 340 million euros not being paid.
Clearly, if this pattern continues in the following months, Finance Minister Euclid Tsakalotos will have a significant problem. The concern is that the tail end of the year is loaded with tax obligations and that Greek businesses and households are buckling under the financial pressure of so many years of escalating taxes without any notable growth.
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Hard transition awaits after summer, Nick Malkoutzis | Kathimerini
