BUSINESS

Debt payment double standards in Greece

PROKOPIS HATZINIKOLAOU

TAGS: Finance, Economy

Taxpayers are suffering from the double standards on expired arrears in Greece: On the one hand the Greek state pays interest of just 3 percent to its suppliers when there are delays in the repayment of its debts or a case is pending in court, while on the other households and corporations have to pay interest of 8.76 percent – from the very first day past due at that.

In a regulation included in the Finance Ministry bill tabled in Parliament last week, the government cites the budget’s heavy fiscal load to justify the reduction of the interest it has to pay in the aforementioned cases from 6 to just 3 percent. It just adds a 3 percent rate to the main European Central Bank refinancing rate that has been at 0 percent since 2016.

Legal sources argue that this clause contravenes a European Union directive, noting that Athens may be asked to change the rate back to its previous level, 6 percent. 

The same sources add that there is also a case law by the Council of State – the country’s highest administrative court – providing that the difference between the two rates (for the state and private debtors) could be up to 30 percent, only if it is deemed there are reasons of public interest; even in this case, though, the spread is much greater.

In fact the state’s obligation to pay 6 percent interest on its expired dues to private creditors is not observed at all. If a company or an individual delays in the payment of their dues, those dues are immediately considered expired and high interest and penalties are imposed, as the law dictates. In contrast, the state can delay payments for up to 90 days without any consequences whatsoever.

The state is obliged to repay its dues with interest after the first three months, but major accounting offices stress that this never happens.

Finance Ministry data show that outstanding tax rebates to enterprises and individuals amount to 891 million euros, of which 734 million euros is long past due. The average repayment time of dues by the state to businesses comes to 357 days – i.e. just short of an entire year.

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