Final budget draft set for Monday, with an increased surplus target

The Finance Ministry is on Monday to present Parliament with the final draft of the 2017 budget, which provides for a primary surplus above that of the first draft due to the continued overperformance of state revenues.

The ministry has been in constant contact with the representatives of the country’s creditors over the past few days, tweaking the final figures of the budget, with the Greek side being optimistic that the creditors will accept the revenue data and their positive impact on next year’s fiscal figures. In any case and regardless of the course of those negotiations, Finance Minister Euclid Tsakalotos has to table the final budget draft on Monday.

Sources say that the ministry has submitted to creditors specific data on which part of the overperforming revenues can be relied upon. Based on these figures, it estimates that the primary budget surplus for 2017 could top 1.8 percent of gross domestic product, as the budget’s first draft predicted.

Before that first draft was tabled, the ministry had processed a scenario that took the 2017 primary surplus up to 2 percent of GDP. However, the government later decided to include additional expenditure of 300 million euros in the budget, destined for social policies, thereby reducing the target to 1.8 percent. The bailout agreement’s target is for a 1.75 percent primary surplus.

Since then the ministry has seen tax revenues beating their targets for September and October, leading officials to believe that there will be a cushion for the 2017 budget.

Nevertheless, sources say that the creditors’ envoys are scrutinizing the data on the increased revenue to establish which part of that is also transferred to 2017.

Besides that, the government and the creditors have a difficult discussion ahead about the midterm fiscal plan. For the plan to be finalized the two sides will have to agree on how the Solidarity Social Income will be financed next year, and mainly in 2018.

The ministry admits there is a gap in that new allowance’s financing and is proposing covering it through cuts to the defense budget and through savings from the spending review of the entire public sector. The creditors, however, insist on reducing social benefits and tax breaks.