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The state budget primary balance remained almost unchanged during August, up by only 89 million euro compared to the level reached at the end of July (Figure 1). This takes the total cumulative primary surplus to 3.8 billion euros, against a target of 3.26 billion. The primary surplus has exceeded the target less than in previous months, reflecting ongoing revenue shortfalls and probably some electoral concerns.

Revenues (Figure 2) have continued to underperform. Revenues for the month of July were almost in line with the target (3.9 billion euros recorded against a target of 4.1 billion). On a cumulative basis, however, total revenues for the period January-August 2015 stood at 30.8 billion euro, against a target of 34.9 billion. This means that the significant shortfall observed in July, when revenues came in at 40% (i.e. 3.2 billion) lower than their monthly target, has not been re-absorbed and risks being a drag on results at the end of the year. Part of the shortfall in ordinary net revenues is attributable to missed ANFA and SMP revenues, but as I pointed out last month, this explains only 1.7 billion out of the total shortfall.

reports that according to the General Secretariat of Information Systems (GSIS), new unpaid taxes resumed an accelerating trend, growing by 645 million euros in August from 388 million in July. “Legacy tax arrears” - tax debt created by the end of 2014 - amounted to 72.18 billion in August 2015. Overall, the total stock of new and legacy tax debt grew by 548 million month-on-month and 5.31 billion year to date to 79.1 billion at the end of August.

On the expenditure side, state budget expenditures amounted to 4.2 billion euros for the month of August, 267 million below target, with ordinary budget expenditures underperforming by 112 million. From January to August 2015, cumulative state budget expenditures made up 31.9 billion euros, 4.7 billion lower than the target. Ordinary Budget expenditures came to 30.3 billion euros, decreasing by 3.2 billion against the target.

In contrast to the situation in recent months, however, primary expenditure has increased and exceeded its target by a tiny amount (87 million). This is the first time since the beginning of the year that we see an expansion in primary expenditure above target. Figure 3 shows that primary expenditure monthly flows were strictly below target for the first seven months of the year. This means that until August, primary expenditure on a cumulative basis has been 2.9 billion below target this year. In this way the Greek government has  persistently achieved an above-target primary surplus. But the expenditure contraction is the result of the government delaying payments of non-payroll expenses to improve the state’s cash flow position, with a potentially negative impact on the economy, as discussed in previous edition of this monitor. The data for August seem to suggest that this draconian expenditure control may have eased slightly after the disbursement of the first installment of the new 3-year program.

To put these numbers in perspective, it may be useful to recall that the third programme foresees a primary deficit target of 0.25 percent of GDP. Based on 2014 GDP, this would amount to about 448 million. Assuming that expenditures return to the path that was set down in the 2015 budget, then cumulative expenditure at the end of the year would be about 55.7 billion.

In order for the primary deficit not to exceed 448 million, end of year revenues need to be at least 55.2 billion, which means in turn that the government still needs to collect about 24.5 billion of revenues before the year's end. Considering the data on tax arrears, this promises to be an important challenge.