The numbers and unknown “X’s” for relief actions for 2024

Written by Tassos Dasopoulos

The increase in net primary expenditure recommended by the European Commission, in the report it submitted in the course of the European semester, is fully consistent with the implementation of all the pre-election benefits of the defeated government, which cover new increases in pensions and the new salary of the state.

It is worth noting that the European Union, in its 2024 guidelines for Greece, recommended an increase in net primary spending by 2.6%. Net prime costs are considered to be all costs after deducting interest on the debt, costs of community initiatives (NSPR and recovery fund) and contributions to EFKA. For 2024, this amount is estimated at 97 billion euros. Therefore, the recommended increase is 2.5 billion euros. Based on the announcements made so far for the next year, the amount of the new measures amounts to 1.3 billion euros, while the costs have already included the new state salary scale as well as increases in pensions, which in 2024 will cost a total of 1.03 billion euros. billion euros.

Pre-election benefits

Additional fiscal measures announced after the election call have a fiscal cost of €230m (0.1% of GDP) in 2024 and 0.3% of GDP in 2025 and 2026, covered by available fiscal space. These include an increase in the tax-free benefit by 1,000 euros for families with children (at a cost of 77 million euros per year), an increase in the minimum guaranteed income by 8% (at a cost of 49 million euros per year), and an increase in maternity allowance for the self-employed. and farmers (at a cost of €40 million per annum), permanent exemption for former EKAS beneficiaries from their participation in drug expenses (at a cost of €38 million per annum), a youth permit for young adults (at a cost of €30 million per annum) and a 10% ENFIA reduction for homes insured against natural disasters (At a cost of about 40 million euros annually).

The total cost of the aforementioned measures for 2024 is €1.3 billion, including pension increases at a cost of €530 million, and new payrolls in the state, which next year are expected to cost around €500 million. If we add to this the cost of new appointments, the cost of the additional budget amounts to 1.5 billion euros, compared to the 2.5 billion that the European Union allows us to spend more. Therefore, if the failed government is re-elected, the implementation of the failed government – the election procedure will be ensured.

Excessive performance problem

The problem that will need to be resolved before it arises is what happens if the economy performs above its targets and there is more fiscal space. The Committee maintains that debt sustainability presupposes a cyclical adjusted primary surplus of 0.5% of GDP for the next four years. For starters, it calls for a cyclically adjusted primary surplus of 0.3% in 2024, a year in which it expects 1.9% growth for Greece, while Athens projects 3% growth in its Stability and Growth Program.

If the Greek projections are verified, it will have to determine what percentage and process the additional fiscal space for the current year can be allocated to new positive interventions for households and businesses. This will be a critical issue that the next government will have to negotiate with the Commission.