Options for primary surplus handouts

 Government must balance needs for this year’s budget targets with impact on growth and political gains

By Dimitris Kontogiannis

The Greek government has the right to distribute a good chunk of last year’s larger-than-expected primary budget surplus for economic and political reasons. However, it is important that the so-called “social dividend” contributes to achieving the 2014 fiscal target by maximizing the impact on the economy.

The Greek economy may be at a turning point. After underperforming in the past few years it may be able to do better than expected under certain conditions and we may already be seeing signs of improvement.

The contraction of economic activity turned out to be smaller than initially projected, at 3.85 percent year-on-year from an initial 4.4 percent, but the most pleasant surprise came on the fiscal front. The general government posted a primary surplus last year in excess of 1 billion euros and even more than 1.5 billion if one-off items are included.

Eurostat will release the final figure in late April. If it confirms that revenues exceeded state spending, excluding interest paid on public debt – known as primary expenditures – the government will have the right to distribute up to 70 percent of the surplus to social groups of its choice. This is because the revised official projection for 2013 called for revenues to be equal to primary expenditures and there is an agreement with lenders that 70 percent of any surplus exceeding the official projections can be distributed, with the other 30 percent retained to service the country’s huge public debt.

The coalition government is eager to have some money to give out before the elections for the European Parliament in May to maximize...