Financial Times
May 16, 2019
Greece’s central bank governor has warned that a package of pre-electoral handouts due to take effect next week could derail the country’s budget target agreed with its bailout creditors.
Yannis Stournaras’s warning came as parliament on Wednesday approved hastily prepared measures that the leftwing Syriza government hopes will boost its popularity ahead of EU parliament elections on May 26.
The package of cuts in value added tax and a pension bonus would cost around €1bn, according to the finance ministry.
Speaking to the Financial Times on Thursday, Mr Stournaras said first-quarter budget figures indicated that the primary surplus — which excludes debt service costs — declined by 0.5 per cent of gross domestic product compared with the same period in 2018. He forecast the trend would continue as tax collection slowed ahead of a general election due in October.
“There is no fiscal space for handouts,” Mr Stournaras said. “The government is unlikely to collect taxes at the same pace as last year, while it will have to address this year a large body of further pension claims covering the crisis period.”
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