The Greek government “underestimated” the financial costs of protracting negotiations for “political benefit,” reads the report of the Parliamentary Budget Office for the January-March 2016 period.
The PBO is an independent authority that monitors the state budget. The first 2016 quarterly report released on Tuesday speaks of “political games” that have delayed negotiations, eventually leading to the need for additional measures that will burden Greek taxpayers.
The writers of the new quarterly report January-March 2016 devote a separate chapter on the “cost of delay” which says the government “underestimated” the budgetary cost of the protracted negotiations for “political benefit.”
“The outcome was new tax measures, but it is doubtful that they will benefit the economy. The prospective new agreement projects new tax measures worth 5.4 billion euros and contingency measures worth 3.6 billion euros currently under negotiation will add pressure to growth prospects,” says the report.
Further on, PBO warns of the possibility for new bank recapitalization and a haircut on deposits. “Bank recapitalization (of last November) tends to be neutralized by the fact that the non performing loans issue has not been solved yet,” it says.
And the report continues: “Despite the apparent intention of completing the negotiation for the first bailout program evaluation, it should be borne in mind that the protraction of deliberations (which should have been completed in October / November 2015 in accordance with the original schedule) had a significant cost. The delay also consolidated an atmosphere of pessimism, creating conditions that prevent the improvement of things immediately after the evaluation.”
“Recession continues in 2016, and that causes fiscal problems. It is common knowledge that tax revenues in conditions of GDP recession are reduced and therefore primary surplus targets are threatened. As a result there are new tax measures and it is dubious whether they will bring results,” the report further says.
Finally, PBO says that the recession is prolonged and notes that the number of unemployed Greeks has soared to 1,174,000.
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