ESM to Athens: Contain support moves
Gov’t considers tweaking primary balance targets to save some fiscal space for next year
Greece will need to save some fiscal space from this year in order to be able to use it for additional support measures in 2023, when the fiscal room will be very tight due to both the target for a return to primary surpluses and the sliding economy lowering growth rates or even leading to a slight recession, a senior European Stability Mechanism official said in Athens on Monday.
Speaking at The Economist conference, the head of the ESM mission in Greece, Paolo Fioretti, called on the government to be prudent with its support measures, arguing that such a thing would be positively received by the rating agencies in view of Greece’s upgrade to investment grade.
According to information, relevant concerns are also developing in the government’s financial staff. In this context, Kathimerini’s sources state, the draft budget for 2023 that will be submitted to Parliament next Monday, October 3, is being formed with a slightly lower primary deficit for this year, against the target of 2% of gross domestic product, but also with a slightly lower primary surplus in 2023, against the target for 1.1% of GDP. Therefore, the overall size of the adjustment will remain the same, as foreseen in the Stability Program Greece has submitted to the European Commission.
Fioretti emphasized the importance of achieving investment grade and pointed out that the recent hold on ratings by Moody’s and DBRS Morningstar means that there has been a slowdown on this path, though not that its momentum has been lost. There is a possibility of reaching investment grade, especially in the second half of 2023, he noted.
For her part, the head of the Commission’s mission in Greece, Julia Levanti, highlighted that the ratio of nonperforming loans has decreased from 40.6% in 2019 to 12.1% today.
However, she underscored that a significant stock of debt remains in the economy, as it is in the hands of servicers: At the end of 2021 they held a debt of 79.7 billion euros, corresponding to 40% of the country’s GDP.
