Greece’s parliament has approved the 2018 budget, described by the government as the last under the country’s multi-billion bailout, which nominally ends in August. “After eight years...this is the final bailout budget parliament is called to approve. We leave behind a period nobody will want to remember,” Prime Minister Alexis Tsipras told the chamber. “We have regained credibility in managing public funds,” Tsipras said.
The Greek finance ministry is maintaining high taxation with the aim of collecting a budget surplus equivalent to 3.8 per cent of gross domestic product (GDP), excluding debt payments in 2018. And the economy is expected to grow by 2.5 per cent, compared to 1.6 per cent this year. “This is the first budget of normality in the past seven years,” said defence minister and government coalition partner Panos Kammenos. “There will be no more bargaining for (bailout) loan tranches,” he said.
The ministry last month said that enough “fiscal room” was achieved to permit tax cuts after 2018, when the country is scheduled to exit its third multi-billion EU-backed bailout. The government has already legislated pension and tax break cuts that will take effect even after Greece exits the bailout, in 2019 and 2020.
EU economic affairs chief Pierre Moscovici has also said that Greece will remain under fiscal supervision until it repays 75 per cent of its EU loans. “There are tight restrictions until at least 2022,” said main opposition leader Kyriakos Mitsotakis. “Greeks hope this will be the last budget by your government.”
Greece is now keen to take advantage of a growing appetite for Greek debt, with its 10-year bond yields lately hovering at pre-crisis levels. Last week, 10-year bond yields fell below 4.0 per cent for the first time since 2006, and five-year bonds are around 3.5 per cent. “This means that independently accessing the markets and regaining the country’s economic and political sovereignty is not just fantasy, it’s a goal fully within our reach,” said government spokesman Dimitris Tzanakopoulos.
According to reports, Greece plans at least two bond offerings in the first half of 2018.