For the good of stability

The Greek Finance Minister’s permanent and declared concern is maintaining fiscal balance as a non-negotiable good. He is right. In any case, for a heavily indebted country like Greece, especially in the current conditions of international turmoil when swarms of uncertainties are sweeping the world, upsetting fiscal balance would be the worst thing that could happen to us.

Rightly, then, Kostis Hatzidakis, together with Deputy Finance Minister, responsible for the State Budget and the General Accounting Office, Thanos Petralias, who perhaps knows and understands more than anyone else the importance of numbers and the interdependence of fiscal figures, pursued and achieved the fundamental aim of fiscal balance across the 2025 state budget. The question is the sustainability of this balance in the medium to long term.

One question is whether and until when will tax revenues be sustainable, considering the way they are raised. We should remember that they were traditionally much lower than the OECD average, they approached this average in the years before joining the euro, they exceeded it in the years of the economic crisis, and today they correspond to approximately 40% of GDP, six points above the organization’s average.

A second and much more important issue is the structure of tax revenues. In our country, the relationship between direct and indirect taxes is typical of an underdeveloped country, not of a developed member of a rich club, like the OECD. In the OECD, in general, for every one unit of direct tax, another one of indirect tax corresponds, while in Greece, one euro of direct tax corresponds to a little more than two of indirect tax. In fact, in 2022, for the first time in history, our country topped the list of 38 OECD countries based on indirect tax revenues as a percentage of GDP. In a nutshell, as Economics Professor Georgia Kaplanoglou Kaplanoglou explained at a conference organized by the Ena Institute: (a) Our indirect tax revenues are by far the largest as a percentage of GDP in the entire OECD. (b) Very importantly, Greece also ranks first as the country with the most favorable tax treatment of wealth. Are these sustainable or will they eventually backfire? The second is more likely.

At the same time, the dramatically low level of spending for the welfare state is also unsustainable. The National Health System has been left helpless to struggle in war-like conditions, while our private healthcare spending exceeds 30% of total health spending, compared to a European average of 15%. We praise education, but we humiliate the newly hired teacher with a salary of 780 euros. And we entrust our national security to young people who risk their lives for 1,000 euros/month – and rudimentary training.

Alongside the asthmatic welfare state, huge shortcomings remain in strengthening the resilience of our infrastructure from the extreme weather phenomena caused by the climate crisis. Indicatively, Civil Protection Minister Vassilis Kikilias suggested immediately demolishing the illegal buildings in Kifissos River and compensating their owners, so that we do not drown in the event of a severe flood. There was no reaction by the government.

Attica Governor Nikos Hardalias said 600 million euros are needed to fortify Attica. As punishment, the government did not support his nomination for the presidency of the Union of Regions.