The budget: A step toward credibility
The effective implementation of a budget largely determines the credibility of a government and, as such, constitutes one of its most important duties. Faithful fulfillment of this year’s budget, however, is imperative for another important reason: Greece’s need to escape a regime of fiscal supervision imposed upon it by the European Commission. During a parliamentary debate about the budget at the end of last year, opposition parties had hastily dismissed it as a sham and predicted that it would not be faithfully executed. There is no doubt that the budget’s forecasts are very ambitious, but official statistics for total state revenue during the first quarter of this year give us reason for optimism; there was an increase of around 15 percent, more than double the targeted hike of 7 percent. A significant proportion of the extra revenue came from an impressive increase in dividends which the state collected in March from various state enterprises and organizations. Another contributing factor was the impact of last year’s increase in the rate of VAT, to 19 percent from 18 percent. But the most significant element is the mobilization of state revenue collection mechanisms. Basically, state monitoring services have been activated following a period of laxity. The presence of teams of inspectors on the market has obliged all manner of businessmen and traders to be far more cautious and resist yielding to temptation; as a result, there has been a notable drop in tax evasion. Inspections have also been intensified at customs houses, which have seen an increase in their revenues. If such a rate of revenue increase is maintained over the second quarter, this will go far toward achieving annual targets – and will help ensure execution of the budget, providing that serious efforts are made to curb spending. If fiscal indicators develop according to budget forecasts, Greece will not only escape fiscal supervision, it will also regain its lost credibility within the EU. If this does not happen, we will have severe financial problems from next year.
