BUSINESS

Hidden debt from sovereign bond issues comes to 14.52 bln

ILIAS BELLOS

TAGS: Finance

Greek taxpayers are saddled with the debts of state corporations and enterprises that come to billions of euros. These debts concern loans that dozens of entities obtained using Greek state guarantees as collateral. As a result, when the time comes for the loan repayment and the entities cannot pay up, as often happens, the state has to foot the bill.

Last year alone the Greek state covered obligations totaling 1.68 billion euros, according to Finance Ministry data correct in December 2015, through the budget’s provision for covering state collateral. This is almost equal to the amount left to cover the fiscal gap for the 2017-18 period in the talks the government is having with the country’s creditors on additional fiscal measures.

In total, the state collateral for sovereign bond issues, including the bonds of some private companies, comes to 14.52 billion euros, which represents a “hidden debt” for the Greek state as it is not calculated in the official debt.

In less than two months’ time, on May 24, the State General Accounting Office will have to pay 250 million euros for an obligation it undertook 12 years ago with a ministerial decision: the guarantee for a Hellenic Railways Organization (OSE) bond issued in May 2004. This bond was issued under English law, so it was not subject to the PSI haircut in February 2012.

In fact, about a third of the entire amount of 14.52 billion euros concerns collateral for the railway corporation. OSE’s state-guaranteed debts in euros and other currencies add up to 4.59 billion euros, according to data from the State General Accounting Office. Notably, many of the current holders of OSE bonds acquired them for a fraction of their original price, but will receive the entire amount.

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