Wednesday, August 16, 2017

Voluntary Austerity?

The Ministry of Finance reported that for the period January-July 2017, the State's primary surplus (not to be confused with the General Government's primary surplus which includes the social security and local administrations and which is the basis for memoranda compliance) amounted to 3.053 MEUR. That was 12% higher than in the same period of 2016 AND 46% higher (!!!) than the 2.098 MEUR which had been the target. Hurrah?

Not really. State revenues were 2% below 2016 so that one would generally have expected a lower primary surplus. The opposite being the case, the answer is obvious: a significant limitation in expenses, i. e. austerity.

In 2016, State expenditures had been 29.755 MEUR. The target for 2017 had provided for an increase to 30.232 MEUR. In actual fact, State expenditures in 2017 were 'only' 28.663 MEUR, i. e. significantly below target and even lower than in the previous year.

Where did the State keep its expenditures below target? Grants to hospitals -199 MEUR, social solidarity income -99 MEUR, family allowances -60 MEUR, earmarked revenues -302 MEUR and public investments -522 MEUR.

By all considerations, the Greek State must be flush with cash: the year 2016 had closed with a budget surplus of 1,3 BEUR; there have been disbursements under the program; fresh funds were raised from markets; the State is not reducing arrears; etc.

In view of the above, it is difficult to understand why the State would voluntarily limit expenditures in such critical areas as hospitals, social solidarity and public investments below the levels provided for in the agreements with creditors. Voluntary austerity at times when creditors are being accused of imposing austerity?

Here are the figures published by the Ministry of Finance and here is the Ministry's commentary.


  1. My exit note to all of you.

    Thank you for your non-observations of my country's affairs. I wish you well in observing and then destroying other countries as well.

    Might I suggest North Korea as your next observation point?

    The exchanges have been informative and have reinforced the point that with Europeans like you there is no hope for tomorrow. I am absolutely disgusted by further observing Greece and in fact totally disgusted with my country and its people as a whole.

    Wishing you all the best. Phoevos is no more.

  2. Why? Who knows. But everybody has plans, tricks and tactics, until they get punched on the nose.

  3. They're hedging against underperformance of tax receipts (already 1/3 didn't pay the first payment of the income tax).

    In the process they're damaging the economy more but, in a perverse way, that's good cause it accelerates the failure of the program.

  4. Maybe they cooked the books again. Either the revenue side was inflated or the expenditures were understated.

  5. Two observations and a question:

    About budget.

    1) At the end of 2014 we had 4 bn € in arrears and primary surplus 0.5%.

    End of 2016 arrears were around 4 bn € with primary surplus 4.2%!

    About current account.


    Receipts in 2016 were 25 bn €. But the level of revenue is reliable given the fact that greek press revealed that many hotels caught from tax authorities to evate?(not to mention rooms, or small hotels).

    Tax authorities discover also that payments (and electronic) were made in other eu countries.

    So which were the real receipts in 2016?

    A way might be the number of tourists, an estimation of expenses per tourist and average accomodation.

    Probably real receipts in 2016 might be 10 bn € gross and 6 bn € net of expenses in all categories.

    If this is right, then Greece for 2016 had a current account surplus (not deficit) at least 5 bn € or almost 3% of GDP mainly from services in tourism.

    The question might be who is influencing the current level of austerity.

    Do we have a current account surplus in 2016?

  6. Jim Slip is spot on. but shifting around with facts and predictions is rather short term.