Handelsblatt: Greece needs to revise its budget plan because it has too much money!

This is among other things reported by the German newspaper Handelsblatt, as translated by the Ministry of National Economy and Finance.

Just last month, Greece’s Minister of Economy and Finance Kostis Hatzidakis presented the budget plan for 2025 to the Parliament’s Budget Committee. Now, he has to revise the plan again — because there’s too much money.

The Finance Minister recently presented preliminary budget figures for the first ten months of this year. Many of his counterparts in the European Union are likely to be envious: Between January and the end of October, Greece achieved a fiscal surplus of €6.1 billion. The budget had forecast a deficit of €2.2 billion.

The primary balance of the budget, which does not include debt servicing, closed with a surplus of €13.5 billion. The Finance Minister had expected a primary surplus of €6.1 billion. Tight fiscal management also contributed to this result: Hatzidakis spent €4.8 billion less than budgeted in the ten-month period.

For the entire year, the Ministry of Finance in Athens expects tax revenues to reach €68 billion, instead of the initially forecasted €66.2 billion. Next year, the amount is expected to increase to €70 billion.

While the European Commission still projects a fiscal deficit of 0.1% of GDP for next year in its latest autumn report, government circles in Athens now expect a balanced budget or even a small surplus.

Greece Achieves Higher Growth Than Expected

There are two key reasons why tax revenues have increased so sharply. The first is the strong economy. The Brussels Commission forecasts economic growth of 2.1% for Greece this year. The Greek government itself forecasts 2.2%. This places Greece well above the EU average of 0.9%. For the next two years, the Commission expects growth rates of 2.3% and 2% for Greece.

The second reason for the revenue increase is the unexpectedly large success in combating tax evasion. In particular, the digitization of tax administration and the trend towards cashless transactions in retail and among service providers promoted by the government are bearing fruit.

Specifically, these successes are evident in VAT collection: From 2017 to 2021, the country reduced the VAT gap from €6 billion to €3.2 billion, according to the European Commission. The VAT gap is the difference between the theoretically possible and the actual collected revenue.

The public treasury still loses about 15% of due VAT. However, the government aims to reduce the gap to 9% by 2026. According to the European Commission, the average VAT gap in the EU in 2021 — the most recent data available — was 5.3%.

Finance Minister Hatzidakis had promised additional revenues of €1 to €1.2 billion this year from tackling tax evasion. The actual amount will be around €2 billion. Next year, additional revenues are expected to rise to €2.3 billion. This will provide the Finance Minister with more leeway for tax cuts and pension increases.

Faster Debt Repayment Than Expected

Privatizations also contribute to the healthy cash situation. With expected revenues of €5.8 billion, 2024 will be the most profitable year since the privatization program started in 2011. The Finance Minister collected €3.27 billion in October alone from a 25-year concession for the operation of Athens’ Attiki Odos highway.

Proceeds from privatizations will be used to reduce debt. This is stipulated in the loan agreements with international lenders, which have saved Greece from the threat of national bankruptcy several times during the debt crisis of the 2010s. Greece is making faster progress in repaying its huge debts than expected.