Among the new interventions are also the measures that did not “pass” the negotiation that took place to finalize the TIF package announced last Saturday by the Prime Minister in Thessaloniki.
The announcement of the measures from Thessaloniki did not include decisions which were almost necessary, but did not enter the lists of 12 income increases and 12 tax breaks.
Two categories
The first of these concerns the reduction of the special solidarity contribution for pensioners with earnings above 1,400 euros without personal difference, which was referred to the Greek calendars. However, when from 1/1/2025 the increase will be given which – according to the prime minister – will range from 2.2%-2.4% without any intervention in the special solidarity levy, then the few euros they will get more they will disappear from the additional taxation.
A second category that was left dissatisfied by the distribution of the measures is the army and the security forces, which from the pie of 1.45 billion euros distributed last week only stand to gain 25 million euros. This amount translates into a per capita increase in wages of around 20 euros through the increase of the night work allowance by 20%.
Dissatisfaction with the very low pay in the Armed Forces has begun to manifest strongly in recent years with departures. Therefore, the issue of substantial income improvement is something that cannot be postponed continuously.
Even increases in the State up to 100 euros can in practice hide unpleasant surprises for many, who will get much less. The horizontal increase to cover the increase in the private sector minimum wage will be around 20 euros. The nominal increase of 100 euros also includes the monthly benefit from the new performance incentive that will be extended in 2025 to approximately 60,000-70,000 employees in special positions in the State at a cost of 40 million euros.
OPECA benefits
There is also concern about the attempt to increase the three most widespread benefits of OPECA (child, housing, minimum guaranteed income) as well as the unemployment benefit. Based on government announcements, the measure will be “fiscally neutral”.
In other words, social benefits will be reviewed and from the “tolerances” that will be identified (ie from cutting current beneficiaries who are not entitled to benefits) the increases for the legal beneficiaries will be financed. As always, there will be “borderline” situations that will require budget resources to cover.
The scope for corrections will be there once the revenue overshoot for 2024 is finalised, which is expected to happen at the end of February 2025. The finance staff expects to exceed the revenue target this year by 1.5-1.7 billion. euros, bringing the primary surplus to 2.5%-2.6% of GDP against the target of 2.1%.
In the negotiation that preceded the TIF, the revenue figures were available until the end of July. The Commission acknowledged the overperformance of the revenue target for 2024, but did not accept to confirm that it will be more than the “net” revenue surplus that results at the end of July, i.e. around 550 million euros.
This was the money negotiated and taken by the government to cover the TIF package. However, it is considered certain that at least another 1 to 1.2 billion euros will arise, which can be certified at the end of the year.
Financial rules
The limitation that exists from this year on the allocation of the revenue surplus is the ceiling on the growth of net primary expenditure imposed by the new fiscal rules.
Now, the achievement of the spending increase ceiling is the only measure by which the fiscal course of a country, and therefore of Greece, will be judged.
The recent increase in the threshold from 3 to 3.5 billion euros to accommodate the TIF measures was made possible by the adoption of the “fine print” of the new fiscal rules. It is now known that for 2025 Greece has a ceiling of 3% increase in spending, which corresponds to approximately 3 billion euros. With the TIF package, the increase has moved in net fiscal terms to 3.5 billion euros. The TIF package, which in pure fiscal terms (that is, if taxes and deductions are calculated) reached 750 million euros, is divided into an increase of incomes by 250 million euros and by 500 million euros in reductions of taxes and contributions.
The first secret of the new pact is that the tax measures do not change the target for increasing spending. This is because the so-called “tax expenditures” are not money that the budget will spend, but revenues that the ministry will not record in its accounts. Greece will have a revenue surplus this year which is expected to reach 0.5%-0.6% of GDP. Well, theoretically, the State will have surplus revenues of 1.5-1.7 billion euros available. Of these, 500 million euros have already been allocated for the TIF package. Now another 1-1.2 billion euros will be available at the end of the year. This money can theoretically be allocated in its entirety for tax reduction.
However, there are still measures on the table which are pure expenditure (eg increases in the salaries of the Government, the Armed Forces and the security forces), where any sums given will become expenditure and affect the ceiling on the increase in expenditure.
Despite the narrowness of the goal, these can also be implemented if we have expenses registered in the budget which can be phased out at the end of 2024.
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#measures #2nd #package #reach #billion #euros
