EU recovery plan could allow tax cuts

Finance Minister Christos Staikouras suggested on Thursday that the funds Greece expects to receive from the Next Generation EU recovery package as proposed by the European Commission on Wednesday could allow for a reduction in taxation.

According to Staikouras, in October the government will submit its proposals for the utilization of resources – 22.5 billion euros in grants and possibly 9.4 billion euros in loans. 

The government’s objective will be to address the consequences of the coronavirus pandemic on businesses, employees and health, while at the same boosting economic the recovery in the coming years. 

However, according to the Commission’s plan, the aim is public investments, which puts pressure on Greece, given the below par performance of its Public Investment Program in recent years.

The weak point from which Greece is starting its quest for economic recovery – namely its high public debt, its lower-than-average European per capita gross domestic product, and its high level of unemployment – is the reason why it secured the largest proportional stake in the Commission’s €750 billion package.

The distribution was largely based on the categorization of countries based according to fiscal and economic performance, with Greece finding itself in the same group as Cyprus, Spain, Italy and Portugal, which also have high debt and low per capita GDP.

However, while it represents 24.8% of the EU’s GDP, this group will receive 50.6% of the package. This is because, according to the Commission’s study, the weakest countries are at the same time the most vulnerable to the impact of the pandemic. 

Commenting on the 32 billion euros that Greece hopes to receive during a cabinet meeting on Thursday, Prime Minister Kyriakos Mitsotakis stressed that the money would not be carelessly spent but managed “wisely, based on a plan.”

“This is a big opportunity to transform our country,” Mitsotakis said, adding that the funds, which would be disbursed over three years, would also allow the government to “reshape” the country’s growth model in line with its original plans.

Mitsotakis said it was “absolutely imperative” that the EU funding not get stuck in bureaucracy. As for the EC’s proposal to grant Greece such a generous package, Mitsotakis attributed this to “the great credibility that our country has acquired over the past year.”