Emergency liquidity injection
The government will do all it can to inject liquidity in order to prevent the shrinkage of Greece’s gross domestic product (GDP) from rising into double digits this year.
The total extent of measures, those already announced and those expected to be announced starting next week, will, according to some estimates, be worth a minimum of €5 billion and may exceed €5.5 billion, most to be spent during the crucial fourth quarter (October-December).
This amount does not include loans provided on favorable terms to large companies through various sources, such as the Second Entrepreneurship Fund.
Finance Ministry officials believe that the recession can be limited to about 8-9% of GDP, despite the expected 80% plus drop in tourism sector revenue, an amount (around €15 billion) that accounts for 7.5% of GDP.
The liquidity injection will come from six actions: First, the reduction of, or total exoneration from, pre-paid taxes on 2020 income from professionals whose income has taken a hit from the pandemic. This should amount to at least €1.5 billion.
We are already in the third phase of this measure, a rolling one based on monthly or quarterly income losses, and there may be a fourth, as the pandemic keeps squeezing the economy.
Second, €1.6 billion to pensioners, mainly from back pay for 2015-16 pension cuts that were ruled unconstitutional, but also for extra pay for new pensioners with many years of employment.
Third, €300 million from deferments and exonerations on back taxes and social contributions owed. Fourth, €1.5 billion from deferment or exoneration of tax pre-payment for companies.
Fifth, €500 million from programs designed to save jobs. And, sixth, suspension of tax payment obligations and partial payments to property owners forced to reduce their rents significantly.
Payments should start being made next week and the measure will likely cost over €100 million, especially if the government agrees to partially pay owners for part of the rent cuts they will voluntary agree with renters.
