Big primary surplus era is over

Greece’s budget has passed on from the primary surplus overruns from 2015 to 2018, to the precise achievement of the target for 3.5 percent of gross domestic product last year, and is now set to register a primary deficit this year due to the coronavirus.

The 2019 figures that the Hellenic Statistical Authority (ELSTAT) released on Wednesday spell the end of an era of excessive primary surpluses that deprived the economy of precious resources, totaling 13 billion euros in its effort to recover, according to the calculations of the previous government. Per the definition of the post-bailout program, the 2019 primary surplus was exactly 3.5 percent, and that was after the social dividend and the Single Property Tax reduction by this government as well as the rather euphemistically titled “13th pension” the SYRIZA administration handed out last spring.

However, in ESA (European system of national and regional accounts) terms, which are the same for all member-states, the primary surplus came to 4.4 percent of GDP last year. That is because this also includes some other revenues such as some privatization takings and the profits eurozone central banks returned from their Greek bond holdings  (SMPs and ANFAs).

The marginal achievement of the 2019 target explains why Finance Minister Christos Staikouras and his deputy, Thodoros Skylakakis, were conservative about the amount of the social dividend that would be handed out. Among the last-minute expenditure was the approximately 550 million euros to National Bank pensioners.

In 2020 Covid-19 is leading the budget into negative territory, which does not matter regarding the country’s commitments that have now been suspended. Sources say the ministry is this year expecting a primary deficit, though not as high as the International Monetary Fund estimated it last week, at 5.1 percent of GDP.

For next year, the ministry estimates the budget will return to a primary surplus, unlike the IMF, which projects the sustainment of primary deficits, at a 4.4 percent rate in 2021.