Tuesday, 12 May 2015

Hard-won surplus slips

The latest Greek budget figures suggest that the government is rapidly losing the budget surplus built up in 2013 and 2014.

First quarter figures published on Monday show the treasury's surplus at 1.186bn euros, down from 2.454bn in the first quarter last year. Most of the loss comes from central government and social security.

The figures show a six percent drop in tax revenue to 8.8bn euros, from 9.4bn euros during the first quarter of 2014.

There is also a 15 percent drop in social security contributions, to 4bn euros, from 4.7bn in the first quarter last year.

The surpluses Greece posted in the last two years were the first in decades.

Underlining the decreased confidence in the economy is the fact that the government doubled its loan guarantees to 121bn euros this year, to from 60bn euros at the end of 2014. This is almost exclusively due to 68bn euros' worth of guarantees to Greek banks, enabling them to draw on Emergency Liquidity Assistance from the European Central Bank. Banks needed ELA to make up for a bank run before and after the January 25 election. Bank of Greece figures leaked to the media last week estimated withdrawals this year alone at 30-35bn euros.

The government revealed on Tuesday that 600mn euros poured into state coffers as a result of a decree forcing local government, pension funds and public bodies to lend it their bank deposits. A mere 64mn of this came from local government, since most mayors are refusing to comply. The government was hoping to raise 2.5bn from the measure.

Syriza hoped to raise 2.5bn euros by forcing municipalities, pension funds and public trusts to lend it their deposits. But it has only raised a quarter of that sum so far, it revealed on Tuesday, 600mn euros, because many mayors refuse to comply.

The protracted talks have also made households uneasy. Depositors have pulled as much as 35bn euros from their bank accounts since the January election, a Bank of Greece email revealed last week.

All this suggests that people’s faith - and authority - are slipping away from the government.

Greece is embroiled in a protracted negotiation with its main creditors, the Eurozone and the International Monetary Fund, over an austerity programme that has been in force since 2010. The leftwing Syriza government maintains that austerity has caused a loss of a quarter of the economy since then. Creditors insist that Greece has to implement the reforms in full. 

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