Editorial: Over-optimism and the deficient primary surplus

The data on the execution of the state budget in the first half of 2018 are anything but optimistic. The target of a super-surplus is teetering, despite the cuts in public expenditures and in public investment. The primary surplus for the first six months is 617mn euros, as compared to 1.94bn euros for the same period in 2017.

It is obvious that an increase in revenues, after raging over-taxation, has begun to reach its limits, as the productive base of the economy has not essentially expanded. The better-than-expected results of insurance funds may increase the surplus of the general government, but they do not constitute a secure base for the development of public finances. This is all the more true after the government some time ago raised the issue of canceling pension cuts that have already been passed by parliament.

The optimism exuded by the government spokesman when he said that as of August the keys of fiscal policy will return to Greek hands without oversight is simply cheap propaganda for domestic consumption. We saw this with the German veto on keeping a low VAT tax on five Aegean islands burdened by the migration crisis.

The fiscal adjustment achieved during the years of the crisis is very important, but it does not suffice to carve out a path of sustainable development for the economy. It was based largely on over-taxation, the increase in insurance contributions, and pension cuts, while the real economy did not get a breather.

With banks sinking under the weight of non-performing loans, unable to fund even healthy businesses, with public investment constantly shrinking in order to reach primary surplus targets, and with state expenditures constantly deficient, the much-desired growth that can change the situation is dragging.

We will constantly be anxious about reaching the primary surpluses to which we have committed ourselves, instead of running to compensate for the years that we lost.