Greece: Greece meets budget targets, receives fresh funds
January 29, 2013
Recent data suggest that Greece is on track to meet the budget targets agreed with the so-called troika under the revised bailout program signed in November 2012. According to preliminary figures released by the Ministry of Finance on 10 January, the primary deficit - deficit before interest payments - stood at 1.9% of GDP in 2012, down from both the 3.1% of GDP tallied in 2011 and the targeted 2.4% of GDP. Additionally, the overall fiscal deficit - including interest payments - fell from 10.9% of GDP in 2011 to 8.2% in 2012 (target: 8.4% of GDP).
Against this backdrop, on 21 January, the Eurogroup announced that Greece will receive the next tranche of financial aid. The Eurogroup highlighted the approval of an income tax reform, which includes higher taxes on salaries and pensions as well as the reduction of tax brackets from eight to three. Euro area finance ministers gave the green light for the disbursement of both the EUR 2.0 billion instalment stipulated in the rescue package and of an additional EUR 7.2 billion in order to cover bank recapitalisation.
Simultaneously, the International Monetary Fund approved, on 16 January, the disbursement of two pending bailout instalments which amount to EUR 3.2 billion. The IMF stated that Greece has made impressive progress, but warned that the country "still has some distance to go". Particularly, the Fund highlighted competitiveness and tax collection as the areas where Greece needs to take decisive action.