Primary surplus, the mother of all battles
Some quick notes on the primary surplus ‘miracle’ that got many wondering yesterday:
– First of all, the finance ministry is yet to release the detailed budget execution for the Jan-Jul period
– It reported preliminary revenues for the period of €27.7bn vs. €21.4bn in the previous six months
– This includes €1.5bn of SMP profits that were transferred to the segregated account at Bank of Greece which is used only for debt servicing purposes. It was agreed in the end of November last year, post budget submission, and is an exceptional item.
– Excluding the above, tax revenues before tax refunds remain short of target of approximately €1.4bn, largely due to delays and extensions related to submissions of tax returns of individuals and a significant shortfall in indirect and consumption taxes. Again detailed execution is not available yet but that was the picture as of June and unlikely it has significantly changed in July
– At the same time, the finance ministry is holding back tax refunds that currently stand at €658m
– Greece in the first seven months of the year has absorbed €1.6bn above target for public investments, €3.9bn vs. a planned €2.4bn
– For the same period Greece has under-spent for public investments €1.3bn, €2.1bn vs. a planned expenditure of €3.5bn
– The public investment balance is hence very favourable both on the receipts and expenditure side
– Excluding the SMP profits, assuming full execution of tax refunds and a public investment balance according to budget Greece would run a primary deficit of approximately €2.5bn
– In summary, the challenges on the revenue side remain, fin min is making every effort to ration primary and public investment expenditure to counter the recession effects and administrative issues on the revenue side. Primary surplus for 2013 has turned into the mother of all battles for the government and as such is making every possible effort to create a cushion that will absorb any shortfalls in revenues in the remainder of the year, which has accumulated a significant amount of tax obligations that has even the troika concerned.