Unexpected primary surplus

The state budget showed a primary surplus of 847 million euros in the first couple of months this year, against a target for a primary deficit of €239 million, thereby making it easier for the government to take additional measures to combat retail price hikes, to be announced as early as Wednesday.

Tax revenues outperformed, as they were €887 million above the target. Even if one deducts the €300 million road tax takings are expected to have come to after the two-month extension from end-December, there is also an overshoot of some €600 million. This is estimated to originate from the better performance of taxes last year, as the income tax and the Single Property Tax (ENFIA) of 2021 continued to be collected up to end-February 2022; it is also thanks to the better performance of this year’s taxes.

Therefore, in February, tax takings were €1.166 billion above target, more than compensating for January’s shortfall.

As Alternate Finance Minister Thodoros Skylakakis declared on Tuesday, “this confirms that the economy had been developing before the outbreak of the war at a faster rate than the budget had foreseen, and facilitates the government in taking relief measures both for households – above all the vulnerable ones – and corporations in the face of the effects from the energy crisis.”

The measures to be announced will include some easing of the fuel burden, directed at vulnerable groups, using income criteria. A ministry official stressed on Tuesday that fuel consumption varies considerably depending on incomes, as higher-income households have more vehicles and use them more for recreation purposes. “Therefore the income criteria make sense,” said the official.

That was also the approach of a European Commission official at Tuesday’s Ecofin meeting, and the argument of Frangiskos Koutentakis, the head of the Parliamentary Budget Office; the latter noted that “horizontal cuts on fuel should be avoided, for the benefit of more efficient and social just measures.” 

Koutentakis added that the gasoline market is not a key priority for the state, unlike subsidies for electricity supply and heating.