«Easter gift» antidote to inflation – Towards emergency allowance for vulnerable households

Under pressure from accuracy which is draining family budgets, The government is speeding up the distribution of a special allowance before Easter to the most vulnerable households: people on low pensions, the unemployed, and those earning the minimum wage.

Source: the economic team yesterday ruled out the implementation of across-the-board support measures, but left open the possibility of providing emergency aid to vulnerable groups. «The economy must not enter a cycle of inflationary expectations. We want to intervene in a targeted manner and to help socially vulnerable people», he noted.

When will the final decision be made?

The suffocating pressure households are facing due to dramatic price hikes across nearly all goods and services is pushing the government to expedite the process for determining both the timing and the criteria based on which a emergency aid for those most in need.

The final decision will be made provided there is a clear picture of how February's revenue will shape up and once ELSTAT announces the 2021 GDP figures, which will reveal the fiscal leeway for greater flexibility. Also, within the government they will wait for the situation in Ukraine to become clearer. Although January’s revenue slowed due to bad weather «Hope» and the pandemic, the news for February is encouraging, as revenue so far appears to be 500 million euros above target. Furthermore, the GDP growth rate in 2021—which all data indicate was above 8%—as well as the primary deficit, which was 2 billion primary deficit in 2021, which appears to provide the economic team with greater fiscal flexibility to support households.

Supporting vulnerable population groups who are hardest hit by rising food prices and high energy costs will be granted based on income and asset criteria, with the number of beneficiaries and the amount they will receive to be determined based on the final budgetary resources that will be secured. It should be noted that the bonus given at Christmas to low-income retirees, people with disabilities, healthcare workers, and recipients of the guaranteed minimum income rose to 335 million euros. However, the economic team makes it clear that under no circumstances will the amount allocated to support vulnerable population groups affect the deficit target of 1.4%.

The budget is being revised

The budget is also set to be revised. When it submits the new Stability Program to the European Commission in late April, the government will incorporate a new baseline scenario for the 2022 budget which, according to a government source, will be based on three factors: energy prices, inflation, and GDP. GDP growth in 2021 was above 8%, compared with the budget estimate of 6.9%, while inflationary pressures are boosting its value in nominal terms. This, combined with the lower primary deficit in 2021, provides the economic team with greater fiscal flexibility to implement additional measures without impacting the deficit.

Yesterday, the General Accounting Office issued the Circular on the Preparation of the 2023–2026 Medium-Term Fiscal Strategy Framework, where, in the first phase, the agencies (ministries, decentralized administrations, supervised agencies, and ADAs) are asked to specify the base case scenario for the period covering: a) the current year (2022), b) the next budget year (2023), and c) the following three years (2024–2026).

The baseline scenario is defined as the preparation of annual revenue and expense forecasts for the entire 2022–2026 period, taking the following into account:
a. The actual figures for 2020 and 2021, excluding the impact of the pandemic and the measures taken to combat it on those figures.
b. The indicative macroeconomic forecasts for the specific period (growth rate, inflation, unemployment, etc.), bearing in mind that they may be updated during the development of the final macroeconomic scenario.
c. The updated rates for expenditure and revenue adjustments that have been in effect until now.
d. Knowledge of or reasonable estimates regarding changes that are planned or highly likely to occur in the coming years (e.g., the termination of a real estate lease).

The circular notes that, starting in 2023, the suspension of the general escape clause of the Stability and Growth Pact which allowed for a temporary deviation from fiscal rules in the years 2020–2022. Consequently, our country, like the other EU member states, will recommit to implementing fiscal rules and achieving specific fiscal targets for the period 2023–2026.

Growth Prospects

Data on business turnover trends in 2021, according to which their turnover reached 332.4 billion euros in 2021, up from 316.9 billion euros in 2019 (i.e., an increase of 15.5 billion euros compared to 2019), signal the prospects for the growth of entrepreneurship, according to the Christos Staikouras. As the Minister of Finance points out, the European Central Bank announced last week that Household disposable income rose by 4.7% in the third quarter of 2021, recording the second-largest increase in the eurozone. Furthermore, according to the ECB, Greece has seen, over the past four years, the largest decline in unemployment—among all eurozone countries—with the result that it is no longer the country with the highest unemployment rate in Europe. In addition to the above, there are the strong economic recovery in 2021, the significant increase in deposits, the steady upward trend in industry, construction, and manufacturing, the improvement in the economic climate, etc.