Through the looking-glass: the art of drafting Budgets in Greek circumstances
by Antonis D. Papagiannidis
For the real fans of Lewis Carroll’s works, one of the deeper aspects of “Through the looking-glass” is the fallacy of equivocation; that is, of using the same term/the very same word to denote clearly different – possibly even opposite – objects or meanings. In the time-honored charade of drafting budgets in Greek practice – not to forget that ex post assessments of the budget’s execution traditionally lacks in both transparence and credibility: for instance financial risks as those accruing from guarantee calls weighing on the public purse are not accounted for, nor are carry-overs from financial year to year of e.g. EU funding – grand language is used to cover nebulous perspectives. To wit: “Greece has entered a virtuous circle of debt reduction and economic growth”, or “fiscal resources are targeted to allow for the maximum economic and social efficiency”.
The fact that the 2024 Budget is being established under a double shock – the natural disaster in Thessaly, a region producing 35% of wheat and a similar share of cotton, 3% of milk and cheese or some 5+% of overall GDP; plus the court-made disaster of having the pension system unravel through a precedent adjudicating retroactive increases in pensions (starting from the judges’ own, but the domino effect is there for all to see…) – allows for increased fudginess. But already the fact that, for the needs of the 2024 Budget, the goal of 0.7% primary surplus expected for fiscal 2023 underway is penned in at 1.1% so as to serve as the foundation for a 2.1% primary surplus forecast for 2024 shows some nervousness.
True enough, tax receipts have been buoyant in 2023, with an expected increase of 9.1% , that is some 1.5 points higher than the increase in nominal GDP (which, in turn, means that the burden to the taxpayer has increased through inflationary drift); one cannot but note, though, that the recent hand-outs , such as energy-related subsidies and food-stamp programmes are no longer provided. Which is an indication that the growth projected for 2024 at 3% (upwards from the 1.9% stated by the European Commission in mid-2023) is less than rock-solid. And so its should: the main economies Greece has as trading partners and as incoming tourist sources – Europe, especially Germany and the UK – look set to spend the end of 2023 and most of 2024 in recession (or close to). Industrial production forecasts as well as those concerning industrial exports prices were rather downbeat as the summer ended; in the tourist/hospitality sector, hotel prices quoted for 2024 look set to be kept lower than expected inflation in Europe, so as to prevent leakages.
A dimension of positive expectations as to tax income increases has to do with the (perennial) hope that tax evasion will be restrained, due to new audit practices and the ever-spreading use of electronic payments: this has to be proved in practice. An approach floated earlier on, by official sources (Finance Under-Secretary H. Theoharis), that a higher basic tax rate be applied to the self-employed who form a large part of the tax evasion crowd, was promptly quashed – which shows political limits to any campaign to effectively restrain tax evasion. The (inflation-aided) high tax receipts of 2023 serve as disincentive to deploy stronger efforts in tax collection.
So, the 2024 Budget will have to fight on its own in this front – plus to hope that EU funds disbursements will keep pace with expectations, helped along by Brussels goodwill built on the basis of a willingness to assist Greece to face the impact of wildfires-and-floods calamities of 2023.
As to the metrics that have dominated the debate over Greece ever since its bail-out and the Adjustment Programmes of 2010-2018, that is the public debt to GDP ratio, official announcements make good use of the expected ratio receding from 171.4% (2022) or 157.3% (2023) to “just” 152.2% forecast for 2024.
It would be unwise , though, to paper over the fact that the stock of Greek debt stands defiant at an all-time high at some 404 bn euros, when it was at 319.5 bn when Greece exited its last Adjustment Programme.