Greek 2016 primary surplus at surprisingly high level

Greek Prime Minister Alexis Tsipras says the EU-IMF squabble is holding back Greek recovery.[European Commission]

Greece in 2016 registered a primary surplus of 3.9%of output,its statistics agency said today(21 April),in an important announcement for the country’s reform talks with its creditors.

Under the bailout,Greece needed to clock a primary surplus–or budget surplus before debt repayments–of 0.5%of output in 2016,followed by 1.75%this year and 3.5%in 2018.

But the state statistics agency noted that Friday’s figure used different EU-compliant calculations to the bailout-mandated surplus – and hence the results were not directly comparable.

The statistics agency did not release a bailout-related surplus figure and the agency did not respond to calls.

Hours before the figures were released, Greek Prime Minister Alexis Tsipras said in an article to the Wall Street Journal that the economy had once again “overperformed”.

The announcement came as Greek officials aim to reach agreement on reform goals with its creditors in talks resuming next week.

The International Monetary Fund today convenes in Washington for its spring meeting where Greek officials hope to secure fresh pledges on debt relief support.

In its announcement, the Greek statistics agency said debt stood at nearly €315 billion or 179% of output, up from 177.4% in 2015.

Eurozone nations particularly Germany want the IMF to retain a central role in supervising Greek reforms, but the global lender says it will only do so if it is satisfied that estimates of Greek recovery are not over-optimistic.

The eurozone says Greece can deliver a primary surplus of 3.5% of GDP in 2018 but the IMF has said only 1.5% is feasible.

In his Wall Street Journal article, leftist PM Alexis Tsipras said the EU-IMF squabble was holding back Greek recovery.

Temporary factors?

“We have committed to fulfilling the obligations undertaken to our creditors despite the political cost,” Tsipras said.

“But the safest way to ensure this is by boosting growth and ending the punishing policies of the past,” he said.

In a report on Wednesday (19 April), the IMF estimated the Greek 2016 primary surplus at 3.3%, noting that it did not have final figures for a definitive result.

IMF fiscal affairs department director Vitor Gaspar acknowledged that the figure was “significantly stronger” than the agency’s prior forecast, but attributed it to “temporary factors.”

Critics note that the government secured the result partly by holding back over three billion euros owed to state providers.

In Athens, the government noted that just a few months earlier the IMF had predicted a primary surplus of 0.1% for 2016.

The IMF has consistently argued that Greece will need significant cuts to be able to reach a primary surplus of 3.5% in 2018.

“The IMF sees a primary surplus of 1.5% as an appropriate level to be sustained over the medium to long run,” Gaspar had told reporters on Wednesday.

But the Greek government insisted that based on the performance of the economy, which it says the Washington-based lender has consistently failed to gauge accurately, there will be no need for additional measures in 2018.

A compromise is required to sign off on a second review of the bailout programme and unblock a tranche of loans Greece needs for debt repayments of seven billion euros this summer.

The review is expected to resume next week.

Portuguese finances continue to impress

The Portuguese government rolled out an ambitious plan yesterday (13 April) to eliminate its budget deficit by 2020 after slashing the gap to its lowest level in at least four decades last year, while also sharply reducing public debt and spurring growth.

‘No need for celebrations’

Government spokesperson Dimitris Tzanakopoulos stressed that “the targets set by the bailout program for 2017 and 2018 will be reached, as the outcome of 2016 is such that it leaves no room for doubt”.

Greece and its European partners recently reached an agreement “in principle” over further pension and tax reforms for the disbursement of the next tranche of the program. In addition, the Greek government announced “positive anti-austerity” measures to be legislated now and implemented in 2019 and 2020 in the event that the economy is within the targets.

“Regarding the positive measures we agreed and will legislate soon for 2019 and 2020, there is no doubt that they will be implemented,” he added.

The government official emphasised that there was no need for celebrations as Greek people have been through many difficulties all these years.

He noted, however, that this is a fact proving that “any IMF reservations about the country’s fiscal path were both unjustified and excessive”.

Tzanakopoulos, also, attacked the conservative main opposition New Democracy party (EPP), saying that their projections about the Greek budget totally failed.

“Will New Democracy vote in favor of the positive measures or it will continue its self-destructive policy?” Tzanakopoulos wondered.