Fires hit the budget of Greece

Fires, floods and other natural disasters have cost the Greek budget about 1.6 billion euros over the past two years, of which 500 million euros are recent fires. And that’s not counting the cost of compensating the population for recovery.

In fact, the 2021 budget was burdened with two main tax breaks that the government was able to provide: a suspension of the solidarity contribution for the private sector (767 million euros) and a 3-point reduction in insurance premiums (816 million euros).

This calculation, cited by the finance staff, shows how tight the budgetary margin for new aid is. Because to the cost of a pandemic – of course incomparably greater – is added the cost of natural disasters, which has been steadily increasing in recent years due to climate change. It is currently stable, but it is certainly measurable and would be much heavier if it were not for the Recovery Fund and the NSRF (National Strategic Reserve), which fund side projects, flood control, reforestation, etc.

According to information from the financial staff, about 3.5 billion euros will be allocated from these funds over the next 5 years. It is a € 1.76 billion civil protection program “Aegis” funded by both the NSRF and the Recovery Fund and the European Investment Bank. While exclusively from the Recovery Fund, among others, 224 million euros are provided, 110 million euros for the National Reforestation Plan – 110 million euros for flood protection, 100 million euros for the protection of biodiversity. Almost 1.5 billion more are provided for similar NSRF projects.

With the Reconstruction Fund projects largely complete and the needs arising from the recent fires impossible to foresee, finance staff points out that the following options exist:

Include some projects in “open” programs, such as urban rebuilding. Ancient Olympia, for example, may be included. Try to replace one project with another in closed programs. Fund from national resources the needs arising from the fires, and then cover from the Reconstruction Fund, which will not be extinguished in 2023, in accordance with the revised version.

In any case, these projects can be implemented, as much as possible burdening the budgetary result. It should be noted that the medium-term program forecasts a primary deficit of 0.5% of GDP in 2022 (from 7.1% of GDP this year).

Instead, the cost of immediate relief measures, such as compensation for damaged or completely destroyed homes, is transferred directly to the primary deficit account, as noted by relevant finance officials.

However, the main deficit target for this year does not appear to be under threat at the moment due to wildfires. Uncertainty remains high, of course, with the outbreak of the pandemic in the fall, but no one is currently discussing isolation and new measures. With this data, budget planning for 2022 will soon begin, which will take into account the Prime Minister’s statements to TIF last year. The extension of the measures in force this year in relation to solidarity and insurance contributions is a matter of course, but in addition to this, possible new measures to mitigate the consequences of the pandemic are calculated, since payments of the so-called. “solidarity contributions” in the private sector are putting a heavy strain on the budget of the poor in Greece.

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