BUSINESS

Double-edged sword for Greek gov’t

EIRINI CHRYSOLORA

TAGS: Finance, Banking

During the pre-crisis years, state-guaranteed loans were provided to citizens for social or humanitarian purposes, such as their being victims of wildfires, earthquakes or other natural disasters. When the crisis peaked, however, the inability of those people to meet their obligations meant that the responsibility fell upon the state. Today this forfeited state collateral stands at 2.1 billion euros and constitutes a double headache for the government. If the state pays out the collateral, it risks facing a fiscal problem, while its failure to cover the guarantees will create problems for the banks.

Kathimerini understands that the European Central Bank’s Single Supervisory Mechanism (SSM) has indicated that if the payments are not made, the Greek banks will need to make additional provisions for that amount, which would threaten their capital adequacy and possibly lead to fresh recapitalizations.

The government is attempting to tackle this problem in cooperation with the banks in a seven-year plan, until 2026. This way the burden will be spread over time and the risk of a fiscal derailment will be averted, though there is pressure for that period to be reduced, Finance Ministry sources say.

The European Commission’s latest report on Greece, published a few days ago, highlighted the issue and said that the slow clearing process has resulted in the amassing of cases at the Finance Ministry, whose competent department is understaffed, numbering just 10 people.

A plan has been put into action to gradually tackle the problem. The plan provides for the operation of an information system by end-2020 and the boosting of personnel at the competent department of the State General Accounting Office. The report says another 10 people will be appointed in the first quarter of next year for an initial period of six years; a further 12 permanent employees will be appointed by end-2022, plus another 12 in 2023, so that staff numbers at the department will return to a level last seen in 2014.

Payouts will start from 4.2 million euros in 2020 and reach 133 million in 2026.

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