Primary surplus fight is shelved

The government is preparing to table its revised midterm fiscal plan with no changes to the primary surplus targets for 2019 and 2020. It is expecting pressure from the country’s creditors as it has not yet figured out how the Social Solidarity Income (KEA, for people in dire financial need) for 2017 and 2018 will be financed.

The Finance Ministry has realized that putting up a fight to change the primary surplus targets would be time-consuming and pointless, with the Greek side almost certainly missing its target. The eurozone does not want this debate to open now, fearing that a drop in the targets would lead to the need for immediate new measures to lighten the Greek debt.

Economic Affairs Commissioner Pierre Moscovici recently conveyed that message to Athens, as did the representatives of eurozone governments in the most recent Euro Working Group, held last Monday. The ministry is expected to raise the issue again during talks between the country’s creditors and the government in Athens on September 12-16, but hopes of a positive outcome on reducing the primary surplus targets are low.

As a result, the ministry is ready to submit the midterm plan with the same targets for 2019 and 2020, at 3.5 percent of gross domestic product. Ministry sources say that the issue will be approached again at a later date, when conditions are more favorable: “After all, the midterm plan is updated every year,” a source explained, suggesting that Athens has not given up on the idea just yet.

The midterm plan will head to Parliament at the same time as the draft budget, which must be submitted in a month’s time – by October 3. The submission of the midterm plan is among the prior actions required for the second review of the country’s third bailout to start, so it must be completed by the end of September, according to the agreement.

However, the plan also includes KEA, whose cost amounts to 900 million euros per annum. The government will immediately need to define the measures that will help finance it, particularly for 2018.