#fiscal gap

Former economy minister Rafizi Ramli has warned that Malaysia’s growing fiscal pressures will pose serious challenges for any government that takes power in the next two years. Speaking during the Budget 2026 debate, the Pandan MP said despite an additional RM15.5 billion in revenue this year, the government has failed to narrow its fiscal gap, signalling deeper structural problems in national…

In an interview with the German magazine Focus, the German Finance Minister Wolfgang Schauble indicated that Greece would require another bailout loan of about 10 billion euros and stated that the country would have to continue to meet the troika's demands for reforms or risk leaving the Eurozone.

Greece faces tough negotiations with international lenders over a looming fiscal gap in the 2014 budget that could undermine its chances of emerging from a six-year recession.

The “troika” – the European Commission, European Central Bank and International Monetary Fund – wants the government to adopt further austerity measures after identifying a potential shortfall of €2bn in the latest budget draft submitted by Athens.

Greek finance ministry officials say the gap amounts to only €500m and can be covered through a crackdown on social security fraud by thousands of cash-strapped small businesses who fail to pay contributions.

“There is a clear disagreement,” said a senior finance ministry official. “The troika always presses for additional measures but we’ve reached the limit for making horizontal cuts in wages and pensions.”

Crunch time for Athens will come at the end of September when EU and IMF inspectors are expected to return to discuss how to plug a budget gap for 2015 and 2016, raising the specter of more austerity cuts that may spark a new political crisis.

"It's certainly going to get tougher both economically and politically," said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels.

"They're kicking the issue a couple of months into the future ... we're going to continue with this charade between the troika and the government where everyone knows what's going on - that it's entirely unrealistic for Greece to live up to its expectations, both in the short and long term."

Samaras has already ruled out any further austerity measures for a nation faced with a 27 percent jobless rate and the Socialist PASOK party - his only remaining ally - has made it clear it will not support another round of painful cuts.

"The flexibility of introducing additional austerity measures over and above those in the current program would be an extremely difficult task for the government given the state of the economy and unemployment," said Platon Monokroussos, an economist at Eurobank.

In addition, funding from Greece's bailout ends in 2014, but Athens' assertion that it could start tapping the bond markets from next year to tackle its future funding needs have appeared premature since yields soared in June.

The IMF - which does not expect Greece to return to markets before the end of 2016 - estimates Greece could face a funding gap of between 5.5 and 9.5 billion euros over 2015-2016.

Sometime in the next six to 12 months, German taxpayers will almost certainly be asked to cough up additional bailout funding for Greece. And unless something drastic changes, for Portugal, too.

And their existing bailout loans to Athens? Angela Merkel, the German chancellor, insists there will be no further losses imposed on Greek creditors, which are now primarily eurozone governments.

But anyone who sits down and does the maths will see it is next to impossible to get Greek debt levels below the promised 110 per cent of economic output by 2022 without such “haircuts” – especially now that it is clear Greece’s privatisation programme will not deliver anywhere near the €4.5bn pencilled in by the end of next year.

Asking German taxpayers to yet again reach into their pockets for billions of additional euros to help Greece and Portugal, and to accept losses on their bailout loans, will be a momentous decision, one that no policy maker will take lightly.

Finance Minister Yannis Stournaras denied on Wednesday that Greece would record a primary budget deficit this year and next, saying its EU/IMF bailout programme was on track to meet the targets agreed with its international lenders.

A draft report by the European Commission seen by Reuters on Tuesday said Greece risked running up a deficit of up to 0.5 percent of gross domestic product this year and next if it failed to deliver on tax collection reforms, though it added that remedies had since been identified.

With Prime Minister Antonis Samaras predicting a recovery for Greece’s economy as soon as next year, the country’s international lenders are more worried about 2015-16, saying the outlook is “inherently uncertain” and will be the focus of negotiations with the government later this year, the European Commission said.

The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) lauded Greece’s progress earlier in making reforms and imposing more austerity measures in return for a second bailout of $173 billion, but said there’s still a big problem with collecting from tax cheats who owe $70 billion, the European Union’s Brussels-based executive arm said in a report.

The government updated its 2013-16 projections to include debt relief measures agreed with Greece's lenders in December and set binding spending limits, a key condition for the continued flow of bailout funding by its euro zone partners and the International Monetary Fund.