Yesterday’s recommendations from the European Commission signal a return to the fiscal “bridle” due to the adoption of the new Stability Pact, as they limit the growth of so-called net primary costs in 2024 compared to 2023 at 2.6%. At the same time, the Commission calls on the government to address a number of chronic weaknesses in the Greek economy, which it highlights in detail, such as tax evasion, especially among the self-employed, and poor public sector efficiency, while ringing the bell for a widening current account deficit. operations and due to the impending possible difficulties in the development of the resources of the Recovery Fund.

In addition, in a separate text of the 2nd Post-Program Oversight Report, the Commission acknowledges the significant progress made in the economy in terms of growth, fiscal performance and the banking sector, but does not lose sight of the delays: while basic pensions are almost paid off, the rest of the plan was not fulfilled. Moreover, he sharply criticizes the government’s decision on the new regulation of debts to the state. He points out that this could undermine the credibility of the fixed fee scheme and damage the payment culture.

Tests

The 2.6% net primary spending cap is marginally covered based on the government’s Stability Program, taking into account the additional pre-election measures it announced after submitting to the Commission at the end of April. This was reported yesterday by sources in the financial headquarters. It goes without saying that SYRIZA measures go far beyond this.

The importance that the Commission attaches to the restoration of fiscal discipline is confirmed by the fact that its first recommendation to Greece is to cancel by the end of 2023 the support measures against energy accuracy and, moreover, to use the corresponding resources that it will save to reduce the budget deficit. . It is clear that the Commission wants any “fiscal space” to be used to improve financial performance, not benefits. If energy prices rise again, he adds, support measures could be taken, but only for vulnerable households and businesses. At the same time, incentives must be created to save energy, he notes, implying that the state cannot absorb all the price increases.

The challenges that the country must face, according to the text of the recommendations, include the following:

• Deficit. An increase in the current account deficit. The Commission notes that this is a serious cause for concern. Although it is projected to narrow partially this year and next, “the external deficit is estimated to remain well above the level needed to ensure a sustained improvement in the country’s net investment position.”

He calls for a broader tax base and stronger tax laws for the self-employed.

• Self employed. Expansion of the tax base and strengthening of tax legislation for the self-employed. He cites data for 2021, according to which more than 67% of the self-employed reported an income of less than 10,000 euros. Total reported revenue was 4.2 billion euros against sales of 48.6 billion euros. The commission calls on the government to change the tax system for the self-employed and use electronic payment data to curb tax evasion in this area.

• Public. Improving the efficiency of the public sector. Incentives are offered for managers to take on additional responsibilities. At the same time, however, it is indicated that spending should be maintained at pre-pandemic levels.

• Health. Public spending on health care is low, at 5.9% of GDP in 2020, compared to the EU average of 8.9% of GDP. In the context of these low spending, medicines account for the highest share in the EU. and prevention is one of the lowest. At the same time, Greeks pay the second largest out-of-pocket amount to the EU. for treatment. The Commission notes that primary health care reform suffers from a shortage of doctors.

• Attachments. They remain low despite rising in recent years and narrowing the gap with the country’s European partners. From 10.7% of GDP in 2019, investment rose to 13.7% of GDP in 2022, narrowing the gap to the EU average. from 11.5% of GDP to 8.7% of GDP.

• Business. The business environment continues to be problematic in many areas despite improvements. In addition to the difficulty of accessing finance, potential investors face restrictions on access to certain professional categories, such as legal services, and the duration of bankruptcy cases is 3.5 years compared to 2 years in the EU. In addition, there are delays with environmental licensing.

• Unemployment. Despite falling to 11.4% in February last year, unemployment remains high, especially among young people, women and third-country nationals. In addition, the participation of youth and women in the labor market is low. Also, real wages fell by 4.7% in 2022 due to inflation. The percentage of the population at risk of poverty is 28.3% compared to 21.7% in the EU.

• Recovery Fund. With regard to the Recovery Fund, the report notes that the country will soon face the weakness of local governments, on which the fulfillment of many prerequisites for the next tranches depends.