BUSINESS

Spending moratorium in place

Government has placed priority on ensuring it can pay salaries and pensions in coming months

With a view to securing the payment of salaries and pensions in the public sector until the next bailout installment is approved by Greece?s so-called troika of international creditors, the government has unofficially imposed an effective moratorium on all other outlays.

Government spending for this year has been budgeted at 108.5 billion euros (including a sum for the recapitalization of banks). Of this, only 40.9 billion had been spent by the end of July. Primary spending, the public investment program and the settlement of outstanding arrears to suppliers have been put on hold, being the only ways of keeping the deficit on target, especially given the difficulty in raising revenues.

According to Finance Ministry data, the total expenditure on investment and operating expenses in the January-July period should have been at least 4.4 billion euros more than it actually was. At the same time, debts to suppliers since the beginning of the year have risen 15.4 percent, or 887 million, and have come to total some 6.6 billion euros. In particular, the available data shows:

I.) According to targets set, the government should have approved credits of 29.5 billion by the end of July but actually fell 2 billion euros short. It also devoted 8 million euros less than the target to subsidize hospitals and 207 million less on weapons programs. There was also an 160-million-euro shortfall in interest payments.

II.) The Public Investment Program has been effectively frozen, with only half of the budgeted amounts being disbursed. Only 2.2 billion euros was spent, against a target of 4.2 billion.

III.) Outstanding debts and subsidies rose from 5.7 billion euros in January to 6.6 billion in July. The biggest problem is faced by social security funds and hospitals, which are owed 2.9 billion and 1.6 billion euros respectively.

The government had agreed with the country?s lenders to spend at least 4 billion on the settlement of these arrears this year. However, for this to be realized, Greece has to present to the troika measures to save 11.5 billion euros over the next two years for the bailout money to be approved. If the government had proceeded as budgeted with expenses, the deficit at the end of July would have been 17.6 billion instead of the actual 13.2 billion euros. The difference is exactly the same as the revenue shortfall for the same period.

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