Memorandum bargains for measures of 29 billion euros

Members of the finance ministry are now speaking of a memorandum with measures of 29 billion instead of the 26 billion we knew of so far. The bargain with the Troika starts on Monday, with the arrival of the envoys of our lenders in Athens. 

But problems are already amassing in the economic team and the first indications from the Greek Statistical Authority talk of a recession of over 5% in the fourth quarter of 2011. 

Such a case would upset the budget estimate of a 5.5% downturn in 2011, as the final result may exceed 6%. This will also put at risk the prediction of a recession of 2.8% in 2012. 

Things get more difficult by the revenue shortfall which, according  to Troika estimates, may reach 3 billion euros at the end of the year. The combination of revenue shortfalls and a reduction in the GDP is threatening to blow the deficit above the 9.5% mark of the GDP, against the targeted deficit of 9%. 

The shortfall of 3 billion may have to be met next year, a notion which - according to the finance ministry - will not create vibrations in the adjustment program. This is because the revised mid-term plan already provides that the measures taken this year, which will deliver in 2012, will add an additional financial benefit of around 3.4 billion euros.

Even if these prove insufficient, the overall package in the period of 2011-2015 will amount to 29.2 billion euros. One can see this if one takes into account the current estimates of the mid-term plan a) for a "fiscal gap" of 13.8 billion in the triennium of 2013-2015, b) for additional measures of 12 billion in 2011-2012, and c) the 3.4-billion savings determined for 2012. 

According to ministry officials, differences in costs may well be addressed next year with new cuts, but the remaining problem is whether they can meet the shortfalls in revenue, given the weaknesses of the collection mechanisms of the State.

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