Commission: Tsipras’ stimulus package costs over one percent of GDP

The European Commission in its quarterly enhanced surveillance report on the Greek economy has warned that the stimulus package announced by PM Alexis Tsipras on 8 May (and adopted on 15 may) will cost one percent of GDP and that there are problematic delays in the privatisation programme and in implementing reforms in the civil service and the banking sector.

The report specifies that the cost of the PM's social benefits and tax cuts will amount to 2.5bn euros in 2019 and 2.7bn euros in 2020.

In particular, there are reservations about a law allowing the payment of delinquent taxes and insurance contributions in 120 instalments as well as about the payment of an annual bonus to pensioners and the rescinding of legislated reforms in the pension system.

Overall fiscal loosening after good start

The report underlines that in general there has been an unwelcome fiscal loosening in implementing reforms agreed to with Greece's creditors and European partners over the last several months and in particular after the formal completion of the third and last bailout memorandum in August, 2018.

It states that the quality of fiscal measures adopted on 15 May is a source of concern as regards the objective of making public finances more growth-friendly and of increasing social spending on population groups that are closer to the poverty line.

It is stressed that those developments throw the achievement of fiscal targets that have been agreed to into question.

Specifically, the report underlines that the measures announced by the PM jeopardise primary surplus targets for 2019 and subsequent years.

It says the precise divergence from fiscal targets will be specified in the next quarterly report in September, 2019.<...

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