An impressive over-performance.
Greece’s primary budget surplus – a key measure of the country’s public finances under its bailout programme – soared to 3.9 per cent last year, smashing through it creditor targets and emboldening the left-wing government’s claims that it has turned around the country’s economic fortunes.
A measure of spending and revenues which strips out debt repayments, the primary budget surplus has become a key battleground between EU and International Monetary Fund creditors deciding on the terms of Athens’ €86bn bailout programme.
The 2016 budget swung dramatically into a primarily surplus of €6.9bn from a deficit of €4.1bn (2.3 of GDP) in 2015, according to Elstat. Despite being calculated differently to its bailout targets, the figures suggest Greece has easily beaten a 0.5 per cent creditor surplus target for this year.
The overall budget is also back in surplus at 0.7 per cent from a deficit of 5.9 per cent in 2015.
Greek prime minister Alexis Tsipras has celebrated the fiscal over performance, which has been driven by higher tax revenues and cutbacks on spending.
But despite the impressive turnaround, the Greek economy has fallen back into reverse, with growth contracting at the end of 2016 and unemployment on the rise. Shrinking GDP has helped drive up the country’s overall debt ratio from 177 per cent 179 per cent of GDP, according to Elstat.
A breakdown of the figures shows the government tightened its belt strings last year, reducing expenditure from €95.2bn to €86.1bn. This has raised concerns among economists and EU officials that Syriza has been “hoarding” cash in an attempt to boost the headline surplus.
The IMF, which has pushed for lower surplus targets a decade after the end of the bailout in 2018, has a more pessimistic take on Greece’s finances.
In its latest fiscal forecasts published this week, the fund expects the temporary revenue boost to dissipate, pushing the surplus to a below target of 1.8 per cent next year. The IMF calculates the budget balance as 3.3 per cent last year.