Quarterly Report April - June 2013

Quarterly Report April - June 2013

The current report examines the observance of the Greek economy’s fiscal targets, which are set in the Mid- Term Programs of Fiscal Strategy, and focuses on the first quarter of 2013.

The report was drawn up according to the present policy framework, as it is formed by the Memoranda that the Greek Government has signed with the European Central Bank (ECB), the European Commission (EU) and the International Monetary Fund (IMF).

Moreover, the report follows the current debate, which takes place in a European level, concerning the need for revised economic governance of the EU and the Eurozone in particular. The consequences of the European developments, which will affect the Greek fiscal governance (preparation of the State Budget etc) too, are examined in the second (2nd) chapter of the current report.

The Coordinator and the Scientific Committee of the Office are aware of the fact that the fiscal adjustment policy puts important questions regarding the burden distribution. Besides, this concept was depicted in the comments of the members of the Hellenic Parliament, during the presentation of the first quarterly report of the Office in the Special Committee on the Financial Statement and the General Balance Sheet of the State and on the Control of the Implementation of the State Budget (see below), May 15, 2013. Several International Organizations (IMF, EU and OECD) have included such remarks in their reports and hence, this issue is open as far as its outcome is concerned.

Box 1: Excerpts and comments made by the members of the Hellenic Parliament during the presentation of the first quarterly report (January- March 2013) of the PBO in the Hellenic Parliament

“ … I would also like to see some data regarding the share of employment and capital or the Gini coefficient which reveals the inequality”,

“… For the monitoring, it is essential that we know the consequences on the income and the way that the policy measures affect the different groups of the society”,

“… I am insisting on that because we should build several scenarios and derive their probabilities so that we can compare the suggested policies. The crucial point is not only whether the targets of the MTFS will eventually be met, but also the burden and its distribution must also be concerned. I think that these scenarios can help the analysis a lot”,

“… We could also have made some more work on the tax elasticity and the public expenditure multiplier”,

“… Some evaluation of the assumptions on which the State Budget rests is necessary. This is very important not only during the preparation of the Budget, but also during its execution, because if there is mismatching with the assumptions on which it rests, it is very likely that considerable deviations will occur, and this is a major problem of the State Budget execution since 1974”,

“… In order for us to be able to do an objective and credible discussion in terms of political economy, and this will give us the chance to realize who will have to face the results of the decisions”.

We will try to expose the problems and the answers given to crucial questions, not only in the main body, but also in a special chapter at the end of each report. In future reports, we will address the issue of the allocation of the fiscal adjustment burden. In this report, we are trying to address the dilemma of the fiscal policy, i.e. whether (and how) the adjustment should go on (deficit elimination): with more or less austerity? We hope that in this way, we can contribute better to the workings of the 2 relevant Parliamentary Committees.

The Coordinator of the Office

Professor Panagiotis Liargovas