From a habit such days each year the budget debate is done, but no one pays attention to it. And this is logically paradoxical because from this “account” it is supposed to be judged that we will “live” next year. How will we live in the sense of what we will need to pay and collect in our transaction with the state, in the context of the planned – budget – evolution of the economy. The reason for this indifference largely relates to two basic causes. One is “old” and has done with the fact that unexpected, internal and external usually derails the Budgetary numbers, both in revenue and expenditure. The second cause is relatively new and has to do with the fact that in the Eurozone and Greece more than any other European country, the “nomera” of the Budget, they are “cooked” after the three memoranda and commitments made with debt restructuring, first in Brussels and then come for approval by the domestic Parliament… Since this year, of course, there is a third reason which could only be seen as a consequence of the second and has to do with the fact that a new rule applies to all Member States. The one defined by the updated Stability Pact, which provides that from 2025 the correlation of public expenditure from public revenue has been dismantled. In other words, public expenditure does not increase or decrease depending on the increase or reduction of public revenue. In other words, the public may increase its tax revenues, but that does not mean that the (each) government has the sovereign right to increase the costs or benefits for a sector of the country’s economic life. On the contrary, the ‘limit’ in which expenditure can and must be increased or reduced is defined by the Commission on the basis of its own budgetary discipline criteria relating to the resolution (i.e. reduction) of public debt. With this data one can easily find that the Budget of 2025 and the next for Greece have as their main economic objective and a dominant effect the debt reduction. This is recognised and even directly by the assessment houses such as Fitch’s which in its latest communication, while maintaining the assessment at the lowest investment level (BBB-) nevertheless acknowledges that “The fiscal and macroeconomic adjustment has accelerated in recent years” and continues. But at the same time “recognises” thus giving a very cautious positive assessment of the effectiveness of this policy that “these advantages are offset against the heritage of the public debt crisis…”. Why? Because it remains “the very high but consistently declining public debt”, “the significant loss of economic production, the low investment rate, persistent external imbalances, but also the old liabilities of the banking sector…”. In other words “sacrifices” are well done, but the fundamental problems of the economy are not corrected. See what “sacrifices” are done (in 2025)? That’s what the tax bill says. Tax revenues will increase in 2025 to 69.2 billion euros, compared to 66.7 billion euros projected to be total tax receipts at the end of 2024. This means that on an annual basis tax revenues will increase by 3.7%, i.e. in real terms, to almost twice as much as nominal GDP growth. In fact, the financial staff last minute felt it necessary to increase the amount of the collection of these taxes by half a billion more and thus corrected the final amount of the draft from EUR 68.7 billion to EUR 69.2 billion… Where are these taxes from? From where it is easy to collect them in a non-progressive manner in proportion to income, from poor and rich, i.e. VAT and the EPC. Income from taxes on goods and services (summarised VAT and IPC) is estimated at EUR 38 billion, increased by EUR 1.6 billion or 4.4% over 2024. VAT revenues will increase to EUR 26,7 billion, (increased by EUR 1.4 billion compared to 2024) and by the EIC will increase to EUR 7.27 billion (increased by EUR 47 million compared to 2024 or 0.65%). And the other side of the hill ends here the almost indifferent history of the Budget? No, this is where it begins to get interesting, because at this point the causes of these magnitudes are placed on the table and thus the dynamic of the failure of forecasts. First and foremost, of course, the upcoming phase of the energy crisis. Cause the two wars in progress, in Ukraine and the Middle East. Currently uncertainties about the expansion of the war in Ukraine have already – combined with a relatively early wave of colds in Europe – caused a sharp rise in gas prices that obliges the government to put the window back into the system of price subsidies. For how high and how tall no one can know since the notorious Trumpic announcement of “stopping the war in one day” was thrown out the window. The situation is similar but at a different time stage and in the Israel-Iran oil conflict. What a coincidence… both points, Ukraine’s Middle East, concern double consumer spending and indirect taxes, namely the ‘heart’ of the budget. And we say double because it’s not just the vertical increase in VAT and EICs in gas and oil with the uncontrolled rise in prices, but also the consequences of inflation that equally eliminate the purchasing power of pensions and income wages… Is that enough? Not according to how it seems, judging by the experience of recent years with natural disasters due to – according to some non-existent – climate change. A small flashback to the relevant statements of the Minister, Mr. Skylakis, is sufficient to understand the extent of this uncertainty in the planned budget expenditure due to natural disasters. Here one should add the consequences of these changes in agricultural production which in no way is prepared for them as already shown in the prices of fresh agricultural products in Greece. At this point one could add some other “uncertainties”, very important, such as the prospects of a new financial crisis (on the part of a new debt crisis cycle) for which Mrs Lagard warned us in recent days. But this alone would require an attempt at forecasts that certainly goes beyond the limits of correlation with the budget forecast… In other words, the draft budget submitted to the House is good to keep in mind, in that that is where the new Community restrictions and intentions of the government are recorded. But let us not expect that we can and base our life planning on it…
Budget 2025, “certainties” about what it will collect, but not what it will “pay” and above all what we will pay…
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