Wednesday, 15 January 2014

Greece's poor could see some relief in May

Greece's ruling conservatives may have the opportunity to woo voters with a social spending package ahead of May's European Parliament election. It would be the first such electoral sweetener in years, and would come thanks to Greece's austere fiscal policy under the tutelage of its creditors.

The government said on Tuesday that its 2013 tax revenues fell 328 million euros short of targets, but government spending was so disciplined that the central government will produce a primary surplus of about 700 million euros, compared to a primary deficit of 3.5 billion euros last year.

Once general government revenues (which include local government, hospitals and foundations) are taken into account, the surplus could reach well over 800 million euros, with some Greek media reporting an expected primary surplus of close to a billion euros. Prime Minister Antonis Samaras has pledged that 70 percent of any primary surplus will go into social spending.

If corroborated by the European Statistical Service in April, the surplus would place Greece's performance last year well ahead of targets set by the European Commission, European Central Bank and International Monetary Fund.

Greece has a way to go, however, if it is to single-handedly service its debt to those organisations without borrowing further. Its adjustment programme forecasts growth of 4.5 percent of GDP by 2016, a difficult if not impossible pole-vault, given a recession of similar size last year.

Should growth fail to materialise this year as expected, Greek taxpayers may also have trouble sustaining payments. The government attributes the revenue shortfall of 328 million euros to delayed payouts from the European Commission, but it could equally suggest increasing taxpayer fatigue. Greeks are being called upon to pay a staggering combination of regular income tax and property back taxes before new tax filings come due in April. The pressure on household incomes is so great that the finance ministry this week advised those who cannot stick to payment schedules to simply pay what they can. 

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