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Economy

After Years of EU Scrutiny, Greece Promises Balanced Budget

October 3, 2022

ATHENS — Greece has promised to return to a budget surplus in 2023, submitting its first spending blueprint in 12 years that is not under the direct scrutiny of European bailout lenders.

Finance Ministry officials said Monday that Greece was planning to return to a primary surplus — the annual balance before debt servicing costs — of 0.7% of gross domestic product in 2023 from a primary deficit of 1.7% of GDP this year.

Achieving a balanced budget was a key demand from lenders during three successive international bailouts between 2010 and 2018 funded by European Union institutions and the International Monetary Fund. A so-called enhanced surveillance monitoring program of Greek public finances by European lenders expired earlier this year.

Deficit rules in the 19 countries that use the euro currency were suspended in 2020 due to the COVID-19 pandemic, but budgets remain under pressure due to high energy costs and additional defense spending — both related to the war in Ukraine.

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

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 European Commission, the EU’s executive arm, wants to reform fiscal rules, making them more growth friendly, before they are due to be fully implemented again in 2024.

Under budget figures submitted to Greece’s parliament Monday, growth is expected to be 2.1% next year, and debt-to-GDP reduced further to 161.6%, from over 200% in 2020.

The growth forecast for 2022 was revised upward to 5.3%, thanks in large part to a better-than-expected tourism season this year.

Staikouras said the budget provided for a 1 billion euro ($978 million) cash reserve — above planned support for businesses and households to cope with energy bills — to address potential additional price increases.

 

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