Thousands offered debt forgiveness in bid to raise fraction of arrears

Greece’s radical government on Wednesday offered debt forgiveness to thousands of individuals and companies that owe the state money, hoping to secure a fraction of arrears.

Junior finance minister Nadia Valavani said debtors offering to pay a minimum of 200 euros upfront could see a haircut of up to 50 percent on the rest of their debt.

Valavani told a news conference that debts to the Greek state had ballooned to 76 billion euros ($86 billion) in unpaid taxes and social insurance contributions.

But realistically, just 9.0 billion euros from that total can be recovered, she added.

“The money that can be demanded and recovered is just nine billion euros, or just 11.6 percent of the total,” Valavani said.

Greece’s own debt to private bondholders and the three institutions supporting the country financially since 2010 — the EU, IMF and the European Central Bank — is around 320 billion euros.

Valavani said the radical left SYRIZA government that came to power last month needs money for its plans to help thousands of Greeks left destitute by the economic crisis and austerity cuts.

“Without income, the required social policy cannot be promoted,” she said.

The government has pledged to spend 2.0 billion euros on immediate poverty relief, and is in critical talks this week with the EU for temporary loan assistance.

Greece’s creditors had already raised objections to debt relief measures submitted by the conservative government that was in power before January’s elections.

They have since warned the new government to refrain from unilateral acts that run contrary to the strict fiscal revenue terms of the country’s multi-billion-euro bailout.

But Valavani on Wednesday insisted the debt breaks were cost-neutral, as the state was earning hardly any money from the current debtor framework.

“We are helping people by allowing them to pay at least 20 euros a month. The result can only be positive,” she said.

Until now, the minister said, the state chased down impoverished debtors owing a few hundred euros and turned a blind eye to others owing millions.

“This behaviour will now be reversed,” she said.

“Those who have debts of 200-300 euros will have them erased… We are setting our sights on larger debts,” Valavani said.