05 June 2015

CEPS: Can the Greek state pay for itself?

A key consideration for the government is whether it can achieve at least a primary balance without ‘recessionary measures’, since it will be able to spend only what it collects in revenues should there be no agreement with the creditors.

The discussions in the continuing Greek saga are now centring on the target for the primary balance, which makes sense because only a government that can at least achieve a primary balance can pay salaries and pensions on time.

In his latest Commentary on the Greek economy, Daniel Gros observes that a key consideration for the government is whether it can achieve at least a primary balance without ‘recessionary measures’, since it will be able to spend only what it collects in revenues should there be no agreement with the creditors. He notes, however, that nobody seems to know the true state of Greek public finances with any precision and that the government might harbour illusions on this question. 

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