The coalition government has submitted the budget for 2016 and its midterm program for 2018 in Parliament on Friday, following consultations with the institutions in the previous days.
The 2016 budget provides 49 billion euros worth of revenue and aims to generate a 0.5% of GDP primary surplus by the end of the year. In order to achieve this ambitious goal the government will bring in measures worth 5.7 billion euros – 3.2 billion euros from additional taxes and 2.5 billion euros from cuts, primarily from the pension system.
Key to the budget will be the release of the 2-billion-euro tranche, which will allow the State to pay off some debts and press forward with the public investments program which has lagged. The main scenario is that there will be a “mild” 1.5% of GDP recession in 2015, in spite of the capital controls and political turmoil over the summer.
The GDP is expected to contract by a further 1.2% in 2016, with the first quarter of the year being the hardest. The Ministry of Finances estimates that taxpayers will suffer from tax fatigue, following payments for income tax, the ENFIA real estate tax, road tax and an increased VAT.
Additionally the government will have to increase its efforts to use NSRF funding, in order to support public investments. Furthermore, the high rate of unemployment – which is currently about 24.6% – remains a serious problem as it is expected to remain about 20% even after 2017, when the economy is expected to recover.
