Greek Economy’s Good, Uh, Bad

ATHENS – While National Bank of Greece (NBG) officials said they were optimistic recovery from a crushing economic crisis is looming, the Finance Ministry fears expected tax revenues will fall short this year.

Finance officials are particularly anxious over how much will be taken in from the new, disputed unified ENFIA property tax that is being revised because it resulted in many bills 1000 times higher than last year’s because it was based on flawed data and high assessments despite falling property values.

Worries are growing at the Finance Ministry about the rest of this year and the possible consequences on discussions regarding the coverage of the 2015 fiscal gap. Concerns are focused on income tax revenues, yields from the new property tax and the economic state of the social security funds.

Addressing an NBG event in Thessaloniki, Chairman Giorgos Zannias said, “The economic climate now is better than it has been over the last few years, major projects have started, tourism is beating one record after another, the labor market is stabilizing and retail sales have reverted to positive territory.”

He said the country now needs stability to contain still near-record unemployment worsened by harsh austerity measures the government imposed on orders of international lenders.

“The most important thing is to avert the uncertainty that ate into the economy in recent years and deserves most of the blame for the huge recession,” said Zannias.

With the last of 240 billion euros ($317 billion) in two bailouts from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) rapidly running out, NBG Chief Executive Alexandros Tourkolias proposed a national memorandum pushing stability although he offered no solutions on how that could happen.

Tourkolias said he believes the country’s banks will perform well in stress tests even though they are ailing and not lending after being driven into difficulty when a previous government stiffed investors with 74 percent losses.

“No matter what problems are identified, the measures taken to rectify them will see Greek banks emerge stronger from the process,” he stated, adding that after the test no one will ever be able to dispute the quality of the Greek credit system again,” he said he believed although many analysts don’t.

That rosy outlook was offset by finance data showing that while the budget recorded income tax revenues at end-July that beat the target by 555 million euros, a 1-billion-euro shortfall has been identified in the sum of tax demanded from taxpayers compared with the target set for the whole of the year, Kathimerini said.

The up-in-the-air ENFIA is undercutting tax projections with disagreement over how much will be paid by taxpayers crushed by the still-unfixed exorbitant rates.

As for social security funds, additional funding of 300 million euros has already been approved to cover part of the deficit of the self-employed professionals’ fund (OAEE), while the Social Security Foundation (IKA) is asking for another 200 million euros and another 200 million will also be disbursed soon for the needs of the civil servants’ fund.

The crucial month regarding the size of the hole from the social security funds will be October, as that is when it will be known whether the money set aside in the budget for the support of the funds will suffice to cover their extra needs.

The Finance Ministry still insists all will be well because expenses are being cut and the government isn’t paying bills in an effort to keep as much cash as possible, although that means people expecting tax returns and vendors who’ve submitted long overdue bills won’t be getting their money on time.

That is contributing to a primary surplus that is now expected to be 2.4 percent of Gross Domestic Product (GDP) compared to an estimate of 1.5 percent. The surplus though doesn’t include interest on debt, the cost of social security, state enterprises, city and town budgets and some military expenditures.