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Economy

Bailouts, Austerity Era Over, Greece Promises EU Balanced Budget

ATHENS – Three international bailouts of 326 billion euros ($323.55 billion) from 2010-18 couldn’t hold down Greece’s debt but it brought conditions to keep spending in line with revenues the New Democracy government promised to meet.

The 2023 budget includes a budget surplus, driven by what’s expected to be record tourism that could bring in more than 20 billion euros ($19.84 billion) in monies – but not enough, the government said, to reduce a 24 percent Value Added Tax (VAT) on food.

That’s because record inflation and soaring energy prices driven by Russia’s invasion of Ukraine required putting 9 billion euros ($8.93 billion) into subsidies to help beleaguered households cope.

And this is the first budget in more than a decade that’s not under the spotlight of the country’s international lenders, including the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM).

With the Bank of Greece expecting 5.3 percent growth even during the waning COVID-19 pandemic, Finance Ministry officials said they expect a primary surplus of 0.7 percent of the Gross Domestic Product of 189.4 billion euros ($187.93 billion) said Euronews.

That’s a big change from 2022’s primary deficit of 1.7 percent, which doesn’t include interest on debt, the cost of running municipalities, state enterprises and some military costs, however.

The lenders required that Greece have a balanced budget before ending so-called enhanced surveillance this year that was being used to make sure the books were in order and met guidelines to prevent triggering automatic spending cuts.

“The 2023 budget is being prepared under conditions of extremely high uncertainty, regarding geopolitical developments at a global level,” Finance Minister Christos Staikouras said, the news site reported.

Budget forecasts, he said, are subject to change due to “geopolitical challenges” including the war in Ukraine, supply of natural gas to Europe, energy and fuel prices more broadly, and European monetary policy.

The ministry though has a more cautious estimate of growth, setting it at 2.1 percent in 2023 and debt-to-GDP ratio reduced further to 161.6 percent, from over 200 percent in 2020 after paying off some bailout loans early.

Staikouras said the budget provided for a 1 billion euro ($990 million) cash reserve, even taking into account the energy subsidies and potential additional price hikes but the food VAT won’t be cut.

The primary surplus target for 2023 is achievable even in a more unfavorable scenario “due to the resilience of public revenues and the margin of fiscal restraint”, National Bank’s senior economist Nikos Magginas told Reuters.

Greece emerged in 2018 from a decade-long debt crisis that forced the country to sign up to three international bailouts. Its economic performance is pivotal as it aims to return to investment grade next year, the news agency also noted.

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