Greek FinMIn officials dismiss the possibility of activating an automatic spending cut mechanism in 2017

Greek Finance ministry officials categorically dismissed the possibility of activating an automatic spending cut mechanism in 2017. Commenting on an IMF’s report estimating lower primary budgets, the officials said it was impossible that the mechanism could be activated in 2017 and noted that practically there was no issue of cutting
spending on wages and pensions.

They noted that the mechanism would be activated only when the economy failed to reach its primary surplus targets, a decision scheduled to be taken in May each year. For this year, the target for primary surplus is 0.5 pct of GDP, for 2017 it is 1.75 pct of GDP and for 2018 it is 3.5 pct of GDP.

In May 2017, the government and its creditors will examine whether the 2016 target was achieved. Therefore, the mechanism it is impossible to be activated in 2017 since this year’s primary surplus significantly surpassed targets so far this year.

The ministry officials noted that the permanent difference between the IMF and European institutions was the Greek debt and primary surpluses. The IMF insisted that measures taken by the Greek government were not enough to support a primary surplus of 3.5 pct of GDP in 2018 and asked for additional measures which were never adopted.