First post-memorandum budget focuses on growth and social relief

First post-memorandum budget focuses on growth and social relief

The first post-memorandum budget was submitted to the Greek Parliament, including projections for strong growth of 2.5% for 2019, from 2.1% this year. According to the budget, this year there will be a primary surplus of 3.98% of GDP against the target of 3.5%. Exceeding the budget target by 0.48% of GDP gives the government a significant margin for a portion of the excess surplus to be distributed in the form of a social dividend to the weakest social groups, estimated at close to EUR 700 million, while at EUR 910 million will be the positive permanent tax and social spending measures of 2019.

The text also adds that the satisfactory fiscal performance in the years 2015-2018 and the improvement in macroeconomic numbers of the Greek economy allow for a gradual change in the fiscal policy mix, in order to increase household disposable income, support sustainable growth and addressing, in a targeted manner, chronic deficits in the field of social protection.

Positive interventions

In particular, for 2019, the change in the fiscal policy mix is ​​implemented through the following measures:

On the revenue side, the reduction of ENFIA by 10% in the midterm, the reduction of self-employed and farmers’ insurance contributions, the reduction of the tax on distributed profits, and the gradual reduction of legal entities’ income tax, from 29% to 25% with a 1% reduction per year.

On the expenditure side, by subsidizing social security contributions for young people under the age of 24, introducing a new housing allowance with economic and family criteria, enhancing special education and training facilities, strengthening the “Help at Home” program.

The total cost of the measures described, including the envelope for the housing allowance, is 0.5% of GDP. It is even increased by some EUR 150 million compared to the corresponding budgetary interventions of the preliminary draft budget.

According to the Greek Ministry of Finance, the adoption of the aforementioned positive financial interventions takes place without the application of the measure of the reduction of the personal differences of main and auxiliary pensions, as well as of the corresponding balancing interventions, as they were included in the Medium-term Financial Strategy Framework 2019-2022 for 2019, with the exception of the Family Allowance Support measure, which is already in place since 1 January 2018./IBNA