The primary surplus of Greece continues to be a thorny issue in the government’s negotiations with its international creditors from the European Commission, European Central Bank and International Monetary Fund. Creditors want changes to VAT, pensions and labor and seek a reduction in public sector wages to cover the country’s fiscal gap and ensure a primary surplus for Greece.

Greece’s international creditors consider the necessity of some measures to be a given: 

– Wages should be cut to 700-1,000 euros per month. Finance Minister Yanis Varoufakis stated on Wednesday that the government would not agree to this.

– Joint VAT should be lifted to 20-23% if low 6-8% VAT is kept with some exceptions.

– Emergency taxes that the government had pledged to abolish should be kept and/or increased. These include the joint property ENFIA tax and extraordinary contribution of 1-5% as well as luxury tax etc. These will burden the middle classes as well as the wealthier members of society to help cover gaps in the budget.

3 billion euros wanted urgently

Greece’s creditors believe that the primary surplus announced by the government four months ago is due to stopping payments worth 2 billion euros to private persons and companies as well as new deficits being “brushed under the carpet” that will be revealed in June and July when the 90-day delay period ends. It is believed that the 0.5% deficit will not be rectified without additional measures to rectify problems in the long-term.

Measures to yield 3 billion euros for the second half-year period are sought by creditors. Even the lowering of the bar for the Greek primary surplus from 3% to 1% won’t help Greece following a dive in the economy in the first six months of the year.

Specifically:

– If the goal for the primary surplus remains at 3% then the fiscal gap will be at 6-7 billion euros. This goal has practically been scrapped.

– A 1-1.2% primary surplus for the GDP will need to be cover a gap worth 2.7-3 billion euros.

– A zero primary surplus so that Greece can break even would require measures worth at least 1 billion euros.