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Greece racks up surplus by keeping foot on investment brake

Greece racks up surplus by keeping foot on investment brake

Greece’s leftwing Syriza government expects that 2018 will have brought another record budget surplus as it strives to please investors — but economists wonder whether the country is achieving more discipline than is good for it.

Figures published in December for the first 11 months of 2018 showed that Greece would outperform the year’s target for the primary budget surplus — that is, before paying interest and principal due on public debt — by a much wider margin than previously forecast.

The primary surplus soared to €7.6bn in the first 11 months of 2018, equal to almost 4 per cent of gross domestic product, beating the finance ministry’s official forecast by as much as €2.8bn.

Euclid Tsakalotos, the finance minister, said in December at a roadshow with US investors that outperforming budget targets boosted Greece’s credibility. “It demonstrates that when the government sets specific targets it can be very successful [in achieving them],” he said.

He conceded, however, that “it’s not the best strategy to overperform every year. That would have [negative] consequences for the economy”.

After exiting its €86bn third bailout in August, a significant step in trying to put its financial crisis behind it, Athens is committed to delivering a primary budget surplus of 3.5 per cent of GDP every year between 2018 and 2022.