Athens Digest 08.05.2019

• PM Tsipras offers voters immediate annual pension benefit, VAT tax relief and announces escrow account to run lower surpluses

• Panos Tsakloglou: 2019 measures aimed at voters

• Commission lowers growth forecast but says Greece will meet its fiscal targets without implementing 2020 tax reform

• Moscovici cautious on surplus overperformance

# The Prime Minister promised voters tax relief before the European polls in less than three weeks, and held back additional measures till 2020, after the general election. Announcing a series of permanent changes, Alexis Tsipras said the government would reinstate an annual benefit for pensioners and reduce VAT on food purchases and restaurants as well as on gas and electricity bills for households and businesses. The government, he said, would plan primary surpluses of 2.5 percent in 2020-2022 and make up the difference with EUR 5.5 billion paid into an escrow account. Finance Minister Euclid Tsakalotos said he would now present the new measures to creditor institutions which currently carrying out their third enhanced surveillance mission in Athens, Creditors’ sources made clear that the link between achieving primary surplus targets and debt relief still stands. “The commitment the Greek government made in the context of the ESM program and the medium-term debt relief measures is very clear: The agreed primary surplus target until 2022 is 3.5 percent of GDP,” an ESM spokesperson was aslo quoted as saying by Bloomberg.

# Speaking to the Athens Digest, Prof. Panos Tsakloglou, Greece’s former representative at the EWG, said: “The Greek economy needs to return to robust and sustainable growth rates. Such rates are achieved when investment rates are high. Currently, private investment rates are anemic while public investment is continuously slashed in order to create super-surpluses. Of the measures announced, we can only take those related to the current year seriously. And from them, only the part reduction in indirect taxation of energy that goes to the business sector will promote investment. The rest are primarily vote-catching measures, even if some of them are worthy, such as the decline in the VAT on foodstuffs. According to all polls, SYRIZA is unlikely to be in government next year; so promises for next year are just that, promises. Some of the measures outlined for next year do promote growth but they are unlikely to attract votes. Hence, they are not going to be implemented in the current election year.”

# The European Commission has lowered its 2020 growth forecast for Greece to 2.2 (from 2.3) percent but also said that Greece will meet its primary surplus, noting that its calculation “takes into account the announcement not to implement the 2020 tax reform.” The Spring forecast, while praising Greece’s overall performance, noted risks posed by court decisions reversing bailout-era cuts as well as “policy initiatives affecting the public wage bill.”

# Pierre Moscovici, the EU finance commissioner, appeared cautious on the government’s reliance on using money from the budget surplus overperformance. “There are commitments. They have to be respected, but don’t have to be over-achieved forever,” he said. “And there will be _ we know that _ a discussion in the future. But this discussion has to be serious and respectful of the commitments taken.” (video here, scroll to 17:13)

On our Radar: Mixed on Migrants
Greeks remain deeply distrustful of public instututions in the wake of the financial crisis and have mixed, even conflicting, views on immigration, a study of Greek attitudes has found. The Ipsos poll for the charity “More In Common” found that 82 percent of respondents believe “the economy is rigged to benefit the rich and powerful.” Two-thirds say Greece has a history of “solidarity and compassion” in receiving refugees, but  51 percent says immigration is bad for the country, using up resources that could be used to help citizens of the country.