Greece will negotiate new fiscal targets with Europe for 2021 onward, finance minister says

CNBC reports that Greece wants to negotiate new fiscal targets with its euro zone creditors as the coronavirus crisis pushes its debt pile to almost 200% of gross domestic product (GDP).

Greece, which has been through three bailout programs over the last decade, agreed in 2018 to reach a primary budget surplus — when a government’s revenues are higher than its spending — of 3.5% until 2022. Though this required level of surplus limits the government’s ability to spend, it came in exchange for softer debt repayment conditions.

However, as the coronavirus pandemic brought the Greek economy to a halt, the country’s finance minister told CNBC he will be discussing new targets with his euro zone counterparts.

“Taking into account what the Eurogroup (of euro zone finance ministers) decided recently, we don’t have these targets in 2020 and we will discuss as Europe, at the Eurogroup, the targets, the rules and the requirements for 2021 onwards taking into account the response to the coronavirus crisis,” Christos Staikouras, Greece’s finance minister, said Tuesday.

In the wake of the pandemic, European policymakers agreed in March to lift fiscal targets for each member country, giving them more leeway to tackle the unprecedented economic shock. However, this is meant to be a temporary measure in response to the economic crisis across the European Union.

The European Commission, the executive arm of the EU, forecast in May a debt-to-GDP ratio of 196.4% for Greece in 2020 and of 182.6% in 2021. In 2019, Greece’s debt pile stood at 176.6% of GDP.

“According to the European Commission, we will not have the largest increase in debt-to-GDP in 2020, we will be the fourth-largest increase, but we will have the largest decrease of this ratio in 2021,” Staikouras told CNBC, saying that Greek debt is sustainable.