Athens Digest 02.10.2018

• With or without… cuts; two-track draft budget in Greek Parliament

• Pension cuts are not a structural measure says Centeno

• Foreign Minister: FYROM still faces risk of collapse

• Not-so-great expectations hitting economic sentiment

• Grim update for Greek population stats

# Greece retained pension cuts in its 2019 draft budget but also detailed reasons _ in a costed secondary scenario _ why Athens did not consider them to be necessary. Klaus Regling, the ESM managing director, called the Greek decision “positive” and noted that the issue would be addressed in negotiations between Athens and its creditors in the coming weeks. The Eurogroup’s Mario Centeno maintained that the cuts were a fiscal measure and not structural in nature (video here, time 09.50). The budget sees growth improving from 2.1 percent this year to 2.5 percent in 2019. Growth was pinned largely on exports after hope of an investment surge in 2018 was whittled down to just +0.8 percent from +11.1 percent. The 2019 primary surplus target 3.5 percent of the GDP is met in both scenarios (3.56 cutting pensions, 4.18 percent without cuts).

# Foreign Minister Nikos Kotzias called FYROM’s referendum a success last night and urged the country’s government to forge ahead with the name-change agreement _ adding a warning that the small Balkan nation still faces the threat of collapse without strong international alliances and domestic political stability. Kotzias, interviewed on state TV, recalled that the referendum is not a condition for the implementation of the Prespa agreement, as it is consultative. He maintained that the ‘yes’ vote represented a real majority despite the low turnout. Visits by Western leaders to Skopje ahead of the vote, he said, had “not helped.” Failure by FYROM’s conservative opposition to demand an election, he also argued, underscored its weak political position.

# Greek think-tank IOBE (“Foundation for Economic and Industrial Research”) said a sharp drop in expectations in industry and construction is to blame for the disappointing economic sentiment last month. The index dropped by four points from July to 101.3 in September, a shift also reported by Eurostat last week. IOBE said uncertainty abroad had hit local sentiment, as well as sobering post-bailout expectations as public and private access to international credit showed no real improvement.

# The gap between births and deaths in Greece’s shrinking population is growing at a dramatic rate. The Greek Statistical Authority said births slumped by 4.7 percent in 2017 from the previous year to reach 88,553, while the number of deaths increased by 4.8 percent to 124,501. Also: Civil weddings outnumbered religious services (25,163 to 24,975) in 2017. And the number of state-registered civil partnerships jumped by 29.5 percent to 4,921 _ including 134 same-sex unions.

On our Radar: Climate Peril at Home
Yannis Stournaras, the central bank governor, says Greece could face major economic consequences if it fails to take national action on climate change. Stournaras said the “cost of inaction” for the Greek economy could top EUR 700 billion by the end of the century. He spoke at the Second Sustainability Summit for South-East Europe and the Mediterranean organized in Athens by The Economist.