Recommendations to show great…restraint regarding government announcements to be incorporated into the Prime Minister’s speech in the TIF is expected to be submitted by the government’s financial staff.

The proposals will be submitted after the August 15 break, as, despite the expected better performance of this year’s budgetit is estimated that the balances in terms of its execution remain fragile, something of course linked to the logic of the communicating containers and the 2025 budget. In the financial staff they have already drawn up the list of “prerequisites” for both the 2024 budget and for the equivalent of 2025. These are the outstanding issues that must definitely be closed before any proposal for additional support measures is put on the table.

The 2024 list includes:

  1. The containment of the “net costs” of the general government at the level of 2.6%. Despite the fact that we are in the 8th month of the year, uncertainty about the evolution of spending remains, while the biggest risk has to do with the unexpected and above all a possible natural disaster. After all, the blow in Thessaly that overturned the data and on an economic level took place at the beginning of September. Holding the rate of change in expenditure is not optional, as from the beginning of 2024 this is the main indicator on the basis of which it is judged whether or not a country complies with the Stability Pact.
  2. Ensuring the achievement of the goal and at the level of collectability of tax revenues. Until the Prime Minister’s speech at the TIF, there will be a clear picture of the course of the collections for the 8th month. Thus, the reaction to this year’s “inflated” clearing papers will also be recorded. At the moment, there is an over-collection of tax revenues, but the data for at least the months of July and August are required to have a better picture of both VAT and the collectability of the income tax of natural and legal persons. Revenues do not directly affect the net expenditure index, which is the critical index this year, but they form the primary surplus, which in turn decisively affects the public debt indices. Smooth development will lead to higher primary surplus production this year than forecast, thus covering any gap arising from possible lower than expected growth.
  3. The financing of the support measure that has already been announcedi.e. the payment of an extraordinary financial aid to pensioners who will not get a raise even in 2025 due to a personal difference. It has already been announced that the specific measure will be financed with the resources from the extraordinary levy for the second year on the profits of the refineries. If, after the fulfillment of these “prerequisites”, a “cushion” of the order of 200-300 million euros emerges, the disposal of which will be deemed not to affect either the performance of the primary surplus or the corresponding net expenses, then this amount expected to be prioritized in the battle against precision. Given that any aid should be one-off and not touch the 2025 budget, the most likely scenario is to expand the list of beneficiaries of financial aid.

Commitments for 2025

The key “requirement” for the 2025 budget is to hold net spending growth to 3% (which translates to just over €3 billion). However, a significant part of this amount has already been committed. On the one hand, there is the assumption that government spending is increasing anyway at a rate proportional to inflation. This for 2025 means something more than 2.3-2.4 billion euros to cover the increase in pensions and the operating costs of the State.

From there, it has already been announced that measures of a permanent nature, amounting to 860 million euros, will be included in the 2025 budget in order to further reduce employer contributions (probably this planned -0.5% will concern employer contributions), abolish the end of service tax for the self-employed, to finance the refund of excise duty on agricultural oil, etc.

As things stand today, the prime minister’s speech is not expected to include other measures with a significant fiscal impact. However, it will include a series of direct performance interventions that will be financed either by community funds or by redistribution of funds from the state budget. The list is expected to include the new mortgage subsidy program (fiscal impact exists only for the interest rate difference that will be subsidized, which translates into a few tens of millions per year), the restructuring of social benefits (increasing the amount in exchange for reducing the number of the beneficiaries), but also a series of subsidy programs for repairs, energy upgrades of properties, etc.

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