Greek gov’t forced to reconsider pledges for next year

The government is reviewing some of its election pledges regarding next year, as their cost would go far beyond the fiscal leeway in 2020 and lead to a reaction by the markets and the country’s creditors.

The measures the government is reconsidering in the wake of the Council of State decisions on pensions are the tax discount for dependent minors, tax bracket changes, discounts for building upgrades and the reduction of the value-added tax on new buildings.

Following the verdicts of the country’s highest administrative court, Athens intends to fulfill its promises in a tighter fiscal framework, while at the same time keeping fiscal stability intact, as assessed by the markets on a daily basis.

In that context the Finance Ministry has left some gaps in the draft budget. They concern the pledge for an increase in the tax-free threshold by 1,000 euros per child, the amendment of tax brackets other than the basic income tax rate that will drop from 22 percent to 9 percent, the promised 40 percent exemption of bills from building upgrade works from taxable incomes, the VAT exemption for new buildings (that may now only apply to those licensed as of 2020), and the increase of the sum for the minimum guaranteed income from 850 million to 1 billion euros.

Finance Minister Christos Staikouras told state broadcaster ERT on Tuesday that additional positive measures remain possible both for 2019 and 2020 if there is some fiscal space “that could be utilized, for instance, for the reduction of the tax deposit, or the tax on professions, or even the increase of the minimum guaranteed income. Every couple of months we offer a surprise, and if in November there is the fiscal space for meeting or exceeding our target, this will obviously be utilized, following cooperation with the prime minister, who will also make the announcements.”

Regarding pensions, Staikouras assured that the government is awaiting the definitive decisions by the CoS and will respect them within the available fiscal space: “We have proven that we respect the decisions of the CoS. The time of their implementation will depend on the decisions themselves,” the minister said.