Mitsotakis Wants Troika to Lower Budget Surplus Target

FILE - Prime Minister Kyriakos Mitsotakis on Saturday during the policy statements in Parliament. (Photo by Eurokinissi/Yorgos Kontarinis)

ATHENS – Having long complained that a primary surplus of 3.5 percent of Greece’s Gross Domestic Product (GDP) is too high and unsustainable, new Prime Minister Kyriakos Mitsotakis said he wants the country’s creditors to let him set a more realistic goal.

The surplus doesn’t include interest on 326 billion euros ($364.75 billion) on three bailouts, the cost of running cities and towns, state enterprises, social security and some military expenditures.

The former ruling Radical Left SYRIZA of then-Premier Alexis Tsipras also built what critics said was a deceptive surplus by holding back payments to those owed money by the state as he said he was bringing recovery from a 9 1/2-year-long economic and austerity crisis.

Having ousted Tsipras in July 7 snap elections, Mitsotakis said he would cut taxes, bring back investors scared off by a corporate rate of 29 percent and SYRIZA elements trying to keep them out and would still meet most fiscal targets without firing workers or rolling back benefits.

Government spokesman Stelios Petsas said Greece will seek negotiations with creditors next year to lower targets for the primary surplus.

“We are determined to boost confidence in the economy by proceeding swiftly with real reforms under our ownership,” he told Parliament. “In 2020, we will request from our partners the reduction of primary surpluses to more realistic levels.”

Petsas spoke before lawmakers voted 158-142 to confirm Mitsotakis’ government formed after July 7 general elections, with all his party’s lawmakers approving but rival parties, including SYRIZA, voting against him, typical in Greece’s internecine style of politics.

SYRIZA, as one condition for a third bailout in the summer of 2015 for 86 billion euros ($96.22 billion), agreed to the 3.5 percent surplus that Tsipras said couldn’t be met and then as he claimed credit for achieving it.

But he also used some 1.7 billion euros ($1.9 billion) from the surplus, or about 1 percent of GDP, for pension bonuses and tax cuts after slashing benefits and raising taxes, as he tried to regain favor before the elections but failed.

That has put Mitsotakis’ plans in a bind as he was relying on some of those funds and he’s also facing a drop in tourism revenues after five straight record seasons from the country’s biggest money engine.

An agreement with the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) said the 3.5 percent target must be hit through 2022, a level the lenders said is key to keeping Greece’s high national debt sustainable.

They earlier said the targets wouldn’t be lowered and Mitsotakis failed to get support from a fellow member of the center-right European People’s Party (EPP,) German Chancellor Angela Merkel, who said there would be no discount as her country’s banks put up the bulk of the rescue monies for Greece.

The issue was discussed in Athens at meetings between the senior representatives of the Troika and ministers from the new government.

Lawmakers voted following a three-day debate, during which Mitsotakis and his ministers outlined major upcoming legislative initiatives.

Mitsotakis, 51, promised to introduce tax cut legislation and to scrap longstanding rules that limit police access to university campuses.

The government also plans to speed up privatizations plans, clear regulations blocking major investments, and toughen detention and deportation policies for migrants whose asylum applications are rejected.

The general election was held nearly a year after Greece’s three successive bailout programs ended. “It is our obligation to send a message of optimism — a message that, at last, something will change,” Mitsotakis said.

New governments in Greece must be confirmed by a vote of confidence after lawmakers are seated in the new session of the Parliament.

 

(Material from the Associated Press was used in this report)