This week the Greek parliament will pass its annual budget, another budget the government will miss at the expense of the country’s social fabric.
The Economist plaudits aside, Greek households are struggling under persistent inflation and rising living costs, with financial pressure having reached critical levels. Necessities have become increasingly unaffordable: enabled by oligopolistic practices, food prices are rising by double digits and energy costs are straining family budgets. This suffocation of the middle and lower classes has created an unprecedented crisis of daily survival, as the government – voluntarily! – maintains excessive fiscal austerity.
By 2025, Greece’s tax revenue is projected to increase by 43.5% (21 billion euros) compared to 2021, with general government revenue reaching 37 billion euros. During this same period, expenditures have grown by only 25 billion euros (19%), with 8 billion euros allocated to interest payments and Recovery Fund obligations.
A significant concern is the 12-billion-euro gap in the primary balance that has not translated into social spending. The situation could worsen without the EU Recovery Fund (RRF), especially considering Greece’s reduced EU budget. The RRF, representing a decade-long effort toward debt mutualization, provides 19 billion euros in subsidies to Greece. Without this support, the Public Investment Program would decrease from 14 billion to 9 billion euros, marking a 35% reduction.
For the 2024-2026 period, the Greek government has set fiscal targets (primary surpluses) of 7.3% of GDP (2.4%, 2.5%, 2.4%). However, the European Commission projects even higher surpluses totaling 9% (2.9%, 2.9%, 3.2%). This difference represents an excess surplus of 1.7%, equivalent to 3.92 billion euros in current GDP terms.
This restrictive and punitive fiscal stance contrasts sharply with other developed economies. During the same period, 26 EU and Western nations are pursuing deficit spending to stimulate growth: Japan (-12.3%), France (-9.3%), USA (-7.8%), UK (-4.7%), EU (-3.1%), and Germany (-2.7%). It is worth noting that EU stability and growth rules actually permit annual deficits of up to 3%.
Greece’s growth performance remains concerning. According to Eurostat, Greece ranks 21st in Europe for growth during 2019-2023, with just 5.8% total growth (1.4% annually). In 2023, the country ranked third-to-last in the EU for trade deficit (14% of GDP) and last in investment-to-GDP ratio – a far cry from the purported economic miracle we see in the headlines.
The government’s 2024 budget projections have demonstrated significant discrepancies: -0.7% in GDP and -7.7% in investment growth. Additionally, there’s a 3.1% deviation from the Commission’s forecast for 2024 export growth, while 2023 saw a 38% overestimation of private consumption, resulting in a 1.3 billion euro shortfall in National Product growth.
The Movement for Democracy, our new party born out of an unprecedented “palace coup” that violated voter and delegate rights at the Main Opposition party (Syriza) I used to lead until recently, proposes that Greece adopt a more growth-oriented strategy by maintaining a 1% surplus over the next three years, rather than the planned 7.3% or projected 9%. This would enable the return of 6% of GDP—more than 13.8 billion euros—to citizens and markets, stimulating demand and investment. Needless to say, such a fiscal plan ought to be coupled with deep and long overdue structural reforms in the tax code, the judicial system, and the government bureaucracy.
The current economic trajectory jeopardizes sustainable growth and social welfare. The government’s austere fiscal policies are at odds with both domestic needs and international trends; a more balanced approach that prioritizes growth, investment, and social spending is the right path forward. The significant discrepancy between tax revenue increases and public spending, combined with worrying economic indicators, suggests that a strategic shift is needed to address the mounting challenges facing Greek society. Our Movement is actively recruiting the best minds to lead Greece with an alternative, human-centric, and reform-oriented plan toward actual and enduring national prosperity.
Γκρικ, καλέ!