Eurobank: No need for horizontal measures

Eurobank’s analysts believe that it is neither necessary nor wise to implement a new package of horizontal fiscal measures beyond those already provided in the existing adjustment program for the Greek economy.

According to the Head of the Economic Analysis of Eurobank, Platos Monokrousos, the implementation of most of the planned spending cuts of the General Government from the beginning of this year significantly reduce the uncertainty that arises from the application of such an aggressive and painful austerity program.

As the bank's analysis states, according to recent estimates by the European Commission, the primary surplus of Greece in cyclically adjusted terms is expected to exceed 6% of GDP this year (much higher than that of other EU countries), thus making achievable the goal to generate a primary surplus of 4.5% of GDP in 2016.

It notes that despite the current high ratio of public debt / GDP of Greece, the borrowing needs of the General Government are expected to drop significantly after 2016 and remain at sufficiently manageable levels for a long time, mainly because of the measures announced in the Eurogroup of November 2012 and the new package for debt relief, which is expected to be announced until the spring of next year.

Eurobank stresses the need to avoid a large new package of horizontal budgetary cuts as such a package could prove counterproductive in light of the negative social, economic and financial impacts might have had due to, among other things, the higher fiscal multipliers in periods of recession.