The more the new Radical Left Coalition (SYRIZA) government focuses on the figures, the nearer it gets to introducing more austerity measures. The most crucial stage of negotiations with Greece’s international Greek creditors came on Wednesday as Finance Ministry officials gazed at a fiscal gap of 5-7 bln euros. Finance Minister Yanis Varoufakis confirmed Proto Thema’s report that the government needs to find money to pay the current state obligations within 10-15 days.
The measures that would be required to cover the huge fiscal gap are such that the government does not even want to consider. Greek Economy Minister George Stathakis was forced to deny the report by the Athens Newsagency concerning the explosion of the fiscal gap to 5-7 bln euros from the 2.5 bln euros that it had been estimated to be prior to the elections. He took to twitter to state that there would be no revenue shortfall according to figures that show a billion-euro “black hole” from the first month of the new budget’s execution. “Whoever heard by statement on television today … understood exactly the opposite of what are being refered to in articles concerning a reported fiscal gap of 5-7 bln euros. I repeat that the fiscal gap would be covered in an ordinary way. In two months there will be no revenue shortfall as the agreement with creditors creates a steady field of stability.”
Despite his tweet, there are sources that confirm that the fiscal gap from 2015-2016 would be at 5-7 bln euros for Greece. The fiscal, rather than funding, gap is threatening as it cannot be covered without emergency austerity measures such as wage and pension cuts.
During his television statements, Stathakis had said that “there will be a solution for the funding of the economy in a very normal and steady way.” Regarding this solution he was answering a question about the funding gap and not the fiscal gap – two different gaps that the minister appears to be confusing as part of a general vagueness when it comes to calculating figures that just don’t add up.
Contraditions:
– The Economy Ministry “source” appears to have compared the 5-7-bln-euro gap with the 2.5-bln-euro gap in “fiscal” finances that was estimated for 2015 prior to the snap elections on January 25 by the troika of Greece’s international creditors from the European Commission, European Central Bank and International Monetary Fund. Hence, it is not a reference to a financing gap.
– 2.5 bln euros was the estimation by the troika and not the previous Greek government, hence it appears that the current government is accepting the former troika’s calculations.
– 2.5 bln euros was just the calculation for 2015 and not 2015-2016 because the European memorandum was to have ended this year.
– Forecasts for the 5-7-bln-euro gap had been made many months ago in an older report by the IMF (June 2014). the IMF program extended it to 2015, a reference that the ministry’s “source” appears to agree with. The IMF had asked for salary and pension cuts at the time and foresaw development for 2015 to be at 0.6% instead of 0.8% (something that the government did not agree with at the time).
– The fiscal gap in the troika’s estimation was based on the ability to achieve a 3% primary surplus for the GDP, a figure that would change now that the new government has loosened the goal to 1.5%.
The confusion is further increased by statements made by the Alternate Revenue Minister Dimitris Mardas, in a radio interview with Vima, refered to an 11-bln-euro fiscal gap until June.
On his part, Finance Minister Yanis Varoufakis told Alpha radio that the country will be “in the red” within just a few days and will have problems paying 1.4 bln euros to the IMF in March. He forecast even greater problems over summer – from June to August – stating that there won’t be enough money to pay for debts totaling 11.4 bln euros of which 1.9 bln euros would be owed to the IMF, 6.7 bln euros to the ECB to pay off two large bonds worth 1.9 bln euros in interest rates and 900 million euros for the public bonds ‘haircut’. Despite this, he expressed his belief that the “Eurozone would not let Greece go bankrupt for a few bln euros!”
On Wednesday afternoon, funding problems were discussed during the first meeting of the Government Financial Policy Council (KΥSOΙP) attended by Deputy Prime Minister Yiannis Dragasakis, Deputy Finance Minister Nadia Valavani and Mardas. The meeting was not attended by Varoufakis and Environment and Energy Minister Panagiotis Lafazanis who were briefing SYRIZA cabinet at the time.
Despite the Greek government’s optimism, German Finance Minister Wolfgang Schauble stressed that Athens may have succeeded in an extension to the monetary framework accompanying the memorandum but it will not get a downpayment if the program is not completed.
