Greece to seek amended fiscal targets after 2020

The government is seeking to ride the new momentum created by the health crisis in Europe, at the expense of the once unique recipe of austerity, while the first-quarter fiscal data compiled by the Parliamentary Budget Office (PBO) indicated an annual deterioration of 1.3 billion euros.

Finance Minister Christos Staikouras told CNBC on Tuesday that Athens intends to negotiate the primary budget surplus targets for 2021 and 2022 in the context of the Eurogroup. That target has been abandoned for this year.

“Taking into account the recent Eurogroup decisions,” Staikouras stated, “these targets do not exist for 2020 and we will discuss with the finance ministers the targets and requirements from 2021, considering also the tackling of the coronavirus crisis.”

This year’s fiscal performance has already started pointing to primary deficits: The PBO estimated this week that the group primary result for the general government in January-March was a surplus of €110 million, against a primary surplus of €1.397 billion in the first quarter of 2019 – that is a deterioration of almost €1.29 billion.

In the stability program the Finance Ministry has submitted to the European Commission, this year’s primary surplus is estimated at 1.9% of gross domestic product, with a return to a primary surplus of 2.5% of GDP in 2021. The International Monetary Fund expects primary deficits both this year and next, of 5.1% and 4.4% respectively. Sources say the Bank of Greece anticipates a 3% primary deficit in 2020 and a primary surplus of 2% in 2021.

The key figure is the extent of the recession, the first signs of which will come on Thursday when the Hellenic Statistical Authority (ELSTAT) publishes its GDP data for the first quarter. On that matter, Staikouras conceded in his interview on Tuesday that “the rate of this year’s GDP contraction depends to a great extent on the performance of tourism.”

Also on Thursday the Eurogroup Working Group will convene, and its approval of the Commission’s enhanced surveillance report will open the way for the disbursement of some €750 million from SMPs and ANFAs.