Analysts and economists have a favorable opinion of the financial measures Prime Minister Kyriakos Mitsotakis announced on September 11 at the Thessaloniki International Fair. They tell Kathimerini the tax breaks are targeted to boost growth and investments, without threatening fiscal stability, especially in the current environment where the rules are more relaxed.
Zsolt Darvas, a senior fellow at Bruegel, says that “Greece is one of the most heavily taxed countries in the world and thus lowering tax rates is important. Nevertheless Greece has the highest level of public debt (as a percentage of GDP) in the European Union and the country has made commitments on fiscal policy in the post-bailout period. Thus, the key question is whether the announced tax cuts will ensure that this target is met,” he says.
Holger Schmieding, chief economist at Berenberg Bank, recounts that “during the Greek debt crisis, creditors and Greek governments had hiked taxes too much. Significant pain was inevitable, but they overdid it. They should have focused more on deregulation to promote investment and the creation of new jobs than on tax hikes that restrain economic activity. Over the past few years, Greece has made significant deregulation progress. That has strengthened its supply potential and its attractiveness for inward investment, even though the impact is now obscured by the pandemic.” He therefore points out that “targeted tax cuts are a good way to promote the trend. By and large, the tax cuts seem to be compatible with fiscal stability under the assumption that Greece will finally have a fully normal tourism season again in 2022 and thus a significant rise in revenues from that sector.”
The PM’s announcements are “completely in line with the de facto political push in Europe to keep fiscal policy very loose for many more years,” argues Raffaella Tenconi, founder of Ada Economics and chief economist of Wood & Co. “In the case of Greece, the change is even bigger because of the past austerity, and of course after the upward revision to GDP it automatically created fiscal space. But overall the content is consistent with the strategy of accelerating the recovery, and that naturally generates more revenues,” she says.