June is a critical month for the 2025 budget, but mainly for the new 4-year medium-term Fiscal Structural Plan that Greece, like the other member states, will submit to the European Commission in the autumn.
On June 19-20, the European Commission will present the spring package of recommendations in the context of the European Semester. The package will include recommendations and will reflect the situation of each member country, while the evaluation report of the Greek economy is expected to be made public in the context of the post-program supervision.Given that the new fiscal rules come into full force from 2025, these announcements are of particular importance as, based on the Commission’s recommendations, countries are called to prepare their 2025 budgets.
Excessive deficit process
The next critical date is June 21, as European Economic Commissioner Paolo Gentiloni revealed on Wednesday that the limits for the increase of net primary expenditure for each country will be sent. For Greece, according to sources, it is estimated that it will “lock” around 3% depending on the course of the economy. For this year, the limit set for Greece was 2.6%.
What does this mean?
Under the new fiscal rules, even costs related to measures that lead to a reduction in tax revenue will be seen as an increase in spending. As many countries will exceed this limit (of net primary expenditure) then the excessive deficit process known to us in Greece since the 2010 crisis will be activated.
As soon as the specific expenditure indicator is “locked in”, the drawing up of the new 4-year medium-term “budget” will be the subject of consultations with the Commission in the summer.
Adjustment period
It is noted that the plans will set out fiscal targets, priority reforms and investments, as well as measures to address any possible macroeconomic imbalances during a period of fiscal adjustment. The “adjustment period” refers to the time frame within which, through a combination of fiscal adjustments, reforms and investment, a member state’s debt level is put on a sustainable downward trajectory.
Officially, the new 4-year mid-term Financial-Structural Plans should be submitted to the European Commission by September 20. However, it is possible to give the member states a few days extension in order to prepare them. In Greece’ case, the submission of the Plan will be a few days later or will coincide with the submission of the 2025 draft budget on October 7.
