The budget plan of 2012 includes two scenarios, one before and one after the haircut, attempting to avoid new measures.
The bill is expected to be completed by Thursday in order to be approved by the cabinet and the Troika. The Constitution provides that the bill should be submitted to the Parliament no later than Monday, November 21.
Information indicates that fears of larger deficit are confirmed due to deeper recession, revenue shortfall, and increasing unemployment rate that press the insurance funds, and inability to inflow of EU funds.
New budget plan would have to deal with deeper recession (5.5% in 2011, 2.7%-2.8% in 2012) and deficit of 8.9% of GDP in 2011 instead of 8.5%, provided by a preliminary draft in October.
The first scenario ignores the effects of PSI program and leads to a deficit of 6.8%-7% of GDP. New measures would be needed to cover 2011 gap, while the government seeks additional measures for 2013-2014 period (€8.2 billion).
The second scenario seeks to include the net effect of the PSI program. Finance Minister Evangelos Venizelos has already announced that the annual benefit from the lower interest servicing costs amount to €4.5-5 billion. But competent officials note that there would be collateral damage to support pension funds and banks.
The end result is under consideration. It is expected to be an annual benefit of €3-4 billion, lowering equally the deficit of 2012 and coming years.
The scenarios would remain on paper until the completion of the bond exchange program.
The next medium-term fiscal program would be determined by the course of 2011 and H1’12 gaps in June 2012.
FinMin officials will discuss on Monday the relevant figures, along with the new tax law, which would be the next bill.
(source: capital)
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