Greek mid-year budget surplus
A surprising positive figure stared back at the Greek finance minister Yannis Stournaras Monday when a mid year budget report showed a €2.6 billion surplus before the omission of interest payments, local government spending and social security funds. Despite the latter, the figure is a much more optimistic realisation than the expected €3.1 billion deficit for the term.
The news follows encouraging actions from Brazil last week where IMF representative Paulo Batista abstained to vote on the new bailout for Greece, scrutinizing the instability of the Greek programme. Following this news, a statement from Brazilian finance minister Guido Mantega was made on Friday, calling for more economically sustainable reforms to be implemented in Greece. The FT reported that the impression in South America portrays a broad dissatisfaction with the Greek bailout programme. It also reported that this perspective is not shared amongst Europeans, who have been most affected by Greece from the shared currency.
On Sunday, German tabloid Der Spiegel reported that a document released by Budensbank stated that the German bank expected Greece to need more bailout funds by early 2014. Where does this put Greece’s current position in context? The positive figure is an unprecedented turn that was not forecasted to occur so recently. It is a result of an increase in EU subsidies, decrease in investment spending and profits from Greek government bonds. Targets to be met for growth and sustainability lay in investment spending and gross tax revenues, however.
Gross tax revenues show a much more pessimistic story, where it is €1.5 billion behind target, indicating that the country is not ready to drive itself. Government spending, on the other hand, has been further reduced by 10% in effort to meet EU and IMF terms for the new bailout strategy. Whether or not it will be able to do so is highly questionable at this point in time with tax revenues staggering so far behind government spending figures.
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