Draft budget sees revenue gap, new measures

A draft budget for 2018 presented in Parliament on Monday predicted strong growth but also pointed to a significant revenue shortfall this year that is likely to result in nearly 2 billion euros in new austerity measures next year. 

The blueprint submitted to Parliament by Alternate Finance Minister Giorgos Houliarakis forecasts a 2.4 percent economic growth rate for 2018 following a 1.8 percent increase this year.

It also predicts that the primary surplus will significantly exceed the target of 1.75 percent set by creditors this year, hitting the 2.2 percent mark, and reaching 3.57 percent in 2018.

The additional revenue will allow the government to offer relief to “economically vulnerable households,” the Finance Ministry said, noting that the precise amount of the “social dividend” will be determined next month.

Mission chiefs representing Greece’s international creditors, who are expected to return to Athens next month, are sure to scrutinize the draft budget and make changes as usual.

The foreign envoys are expected to focus in particular on the shortfall in revenue for this year – estimated at 1.86 billion euros.

It appears that the shortfall is chiefly attributable to excessive taxation as the higher rates led to a high rate of nonpayment of income tax while the increased tax rebates – a result of creditors’ demands for the payment of dues to third parties – also ate into income tax revenues.

One saving grace in the budget is cuts in state spending, particularly expenditure on pension funds.

The blueprint foresees significantly reduced spending on pensions and more revenue from social security contributions due to the increased rates for self-employed professionals.

Belt-tightening measures reduced the pension funds’ deficit by 1.44 billion euros in 2017 and are to cut a further 1.36 billion euros in 2018.

Presenting the blueprint in Parliament, Houliarakis sought to strike a positive note, describing it as “the last budget of the programs,” a reference to Greece’s scheduled exit from its third international bailout next summer.