ATHENS — Greeces new conservative government put forward its first budget Monday, with ambitious growth targets and a distinctly pro-business line.
New Democracys first draft budget since taking over from the far-left Syriza in July envisages tax cuts with an eye to encouraging private spending and foreign investment. Deputy Finance Minister Theodoros Skylakakis described it as a “radical turn to growth, employment and income increases.”
Greeces economy started to grow in 2017, albeit at an anemic rate, and it exited its third bailout program in August. International creditors, who continue to monitor fiscal policy closely, may be taken aback by Athens promises to deliver surpluses of 3.5 percent of gross domestic product — excluding interest payments — until 2022 and then a rate of 2.2 percent until as far off as 2060.
Greece still has major hangovers from its prolonged financial crisis. Its national debt and jobless rate remain the highest in the eurozone and its banks still have to deal with the biggest pile of non-performing loans in the European Union.
Yannis Mouzakis, co-founder of Greek analysis website MacroPolis, singled out the conservative governments signature budget moves as “lowering corporate taxation, dividend taxes and the entry tax rate for personal incomes.”
He said that the upwardly revised growth estimate of 2.8 percent is well above forecasts from organizations that still monitor Greeces performance, “including the European Commission, which will need to sign off the budget parameters.”
The European Commission forecasts 2.2 percent growth in Greece next year.
The government said it will stick to the countrys fiscal promises for 2019 and 2020, but it wants to renegotiate with creditors the primary surplus targets from 2021 and onwards.
But achieving both the fiscal targets and the growth numbers set in the draft budget will prove extremely challenging. Greeces Fiscal Council, which monitors the process, says the 2020 growth target is “particularly demanding.”
Greeces creditors have already identified a fiscal gap of around 0.5 percent of GDP in the governments 2020 budget plans. The Greek side is proposing a range of alternative measures to plug the gap and get creditors consent in coming days.
“A lot of these [measures] relate to fighting tax evasion. In the past, the countrys creditors have met such proposals with skepticism,” said Mouzakis.
In late September, the International Monetary Fund backed Greeces call foRead More – Source