New eurozone rules: how much does the Greek state give for defense and how much for a family?

As Europe enters into new, more flexible rules on public spending, and as Greece looks set for strong growth in 2024, one thing is needed: improving the quality of the economy.

In particular, it is necessary to abolish the limit on taxes that proportionally exceed the average salary in Greece. But first of all, it is necessary to increase spending on social security and strengthen weapons against demography.

One birth, two deaths

The numbers illustrate the tragedy: for every birth there are two deaths. One birth for every two births, one death for every two deaths, dampening the glimmer of optimism about the prospects for the Greek economy. After all, the demographic situation has a terrible impact on employment, production, insurance and consumption. It is worth noting that increasing social spending is, according to surveys, a social request.

Under the new European rules, investments in defense, that is, in weapons programs, will be recognized. On the other hand, both existing and new rules stipulate that member states should generally set more ambitious budget deficit targets than the 3% treaty ceiling.

So, despite the celebratory mood of achieving a surplus in this year’s government budget, another negative balance lurks in the shadows. It concerns fertility, and this phenomenon is growing.

The rules provide an opportunity to increase government spending to support communities and families, for example through tax cuts. It also introduces the possibility of not taking defense expenditure into account when a member state is included or not included in the excessive deficit procedure.

More resources for defense, less for family

A survey conducted in April by the diNeOsis Institute entitled “What Greeks Think” shows that Greeks consider “demography” to be the biggest threat to our country. This is followed by Greek-Turkish relations and the economic situation.

However, an analysis of the figures for 2024 shows that the government is forecasting costs of €2.1 billion. We are talking about measures taken in the interests of the family (such as benefits, tax breaks, etc.). Although these funds have increased compared to 2023 (1.5 billion euros), they are less than, for example, defense spending.

The state budget for 2024 marks another increase in allocations for weapons programs and overall defense spending, with the planned budget of the Ministry of National Defense amounting to 6.1 billion euros. Of this amount, 2.6 billion euros are earmarked for weapons programs.

Pension expenses

The bulk of government spending in euro countries is on social policy. However, they are distributed differently in different countries. In Greece, out of 57.4% of GDP in government spending, 31.7% goes to social needs, of which 20.6% goes to pensions and benefits.

According to the statistics office, social protection spending in 2021 will amount to 48,600 million euros, an increase of 0.9% compared to 2020. The largest share of expenditure is related to old-age benefits, which in 2021 amounted to 52.2% of total social protection expenditure and decreased by 1.0% compared to 2020.

Next in descending order are expenses for sickness benefits, which in 2021 amounted to 22.2% of total expenses, an increase of 6.7% compared to 2020, and expenses for survivors/widow benefits, which amounted to 9. 9%, an increase of 3.8% compared to 2020.

What does the new stability pact provide for?

If a Member State has a higher defense investment than the European average or significantly increases its defense investment, the option is introduced to disregard these expenditures for the purpose of including or not including the Member State in the excessive deficit procedure. Defense investment is the only category of expenditure for which this provision is expressly provided.

Secondly, the reduction of public debt will be gradual in order to maintain the momentum of the European economic recovery. According to current rules, any Member State EU with a debt of more than 60% of GDP is obliged to annually reduce its debt by 1/20 of the excess amount. In practice, for Greece this means an annual debt reduction of 4.5-5% over the next few years. Under the new rules, the required debt reduction will be calculated taking into account the particularities of each member state, with the minimum threshold for countries with high debt levels (>90% of GDP), such as Greece, being set at an average annual debt reduction of 1%.

Third, it is ensured that the inclusion of interest on official borrowings in public debt, planned for 2033, will not be taken into account in calculations of the dynamics of Greek public debt in the context of the implementation of new fiscal rules.

What does this mean and what is the problem?

Speaking to OT, Georgios Meleas, national expert of the European Economic and Social Committee, said: “The only issue that requires attention for the southern countries and therefore for Greece is that the council agreed to leave the excessive deficit procedure unchanged on the basis deficiency criterion.”

On the other hand, Mr Meleas said, what is important for Greece is a special approach to defense investment, which in practice means that arms spending will not be taken into account when calculating excessive deficits. In addition, the gradual annual reduction in deficit and debt for Greece will be reduced from 4.5-5% to 1% (at least). This will give a big boost to the country’s finances and will contribute to growth policies and poverty alleviation.

Finally, the most important element of the new agreement is that we now move to individual national fiscal adjustment plans, in which Greece will propose its own set of measures (which will of course comply with the new rules) based on its needs and characteristics, and the final agreement will be based on this proposal and its consideration by the commission.

Source link