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Uncertainty in the extinction of domestic debts

29 November 2012 / 17:11:21  GRReporter
2714 reads

Victoria Mindova

The Greek government has announced that it will begin paying the private sector after its obligations exceed nine billion euro. The money will come from the financial aid from Europe and the International Monetary Fund, but instead of paying it at once, as provided in the initial plan, they will pay it in tranches.

Deputy Finance Minister Christos Staikouras and the head of the National Audit Office have announced that the first 3.5 billion euro will be allocated to the ministries by March 2013 and the total value of 9.3 billion euro in overdue payments will be repaid by the end of 2013.

Although the government has set the time-frame for the settlement of the obligations, Staikouras failed to answer the question of when the payments to private providers will begin or who will receive the delayed funds first.

The 12 ministries of the central government have accumulated billions in unpaid debts to suppliers. In order for the government institutions to obtain the money to repay overdue obligations, they must sign separate internal memoranda of cooperation with the finance ministry. They will oblige the ministries not to overspend and the ministers will pledge to maintain the level of expenditure at the level of revenue hereafter.

The first task of the ministries is to conduct an internal audit. Priority will be given to the oldest obligations that the government has not repaid since the outbreak of the financial crisis.

The largest amount (48%) will go to repay the debts of social security and health insurance funds. The obligations of public hospitals and clinics are 19%.

The overdue payments in the health system are mainly to pharmaceutical companies and suppliers (wholesalers), medical and pharmaceutical associations (retailers). The delay in the payment of these obligations is the basis for a series of strikes and protests that pharmacists, doctors and other hospital staff in Greece have taken.

10% will be allocated to local government organizations, 8% will go for the return of VAT to large enterprises the tax return to which has been delayed by more than a year. The total amount of VAT the state owes to Greek business exceeds 1.5 billion euro. The same is the amount of outstanding but due single benefits payable on retirement, to which the 44,000 public workers, who have recently retired, are entitled.

The remaining amount for the repayment of domestic public debt will go to the ministries of civil protection, military defence, agricultural development, foreign affairs, merchant marine, tourism and education.

The ministry of finance explains the huge amount of overdue payments with the inefficiency of the public sector, the unrealistic goals for the implementation of the budget set in previous years and the recession that is deeper than expected. Greeks joke that now, the public administration will have to put order in its activities whether it wants to or not. However, few are those who truly believe that the irregularities in the public sector will disappear in 2013.

Tags: EconomyMarketsOverdue paymentsGreeceDebtsCrisis
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