Debt payment plan offers huge haircut

A new repayment plan for expired debts to the state and social security funds announced by the government on Wednesday provides for a reduction to the fines and penalties levied against debtors as well as for a writedown of the original debt, reaching as much as 50 percent rate in some cases.

The new scheme, which has already generated concern among Greece’s international creditors but also among consistent taxpayers, foresees the repayment of debts in up to 100 monthly installments regardless of their size. The minimum installment will be set at 20 euros, while for debts up to 5,000 euros there will be no interest attached.

Depending on the number of installments, there will be a reduction to penalties and fines ranging from 30 percent to 90 percent, and in cases of repayment in a lump sum the penalties will be written off entirely.

Crucially, for debts generated up until December 31, 2013, a part of the original debt can be written off, by as much as 50 percent in certain cases. The plan further waives the limit of 1 million euros for debts that can be negotiated for settlement, making repayment easier for major state debtors.

In presenting the new scheme yesterday, Alternate Finance Minister Nadia Valavani stressed that this will be the very last opportunity given to taxpayers to settle their debts to the state. She added that at a later stage there will be another, more favorable plan, concerning only those who find themselves in financial hardship.

Ministry calculations show that out of the 76 billion euros of outstanding debts by taxpayers and corporations to the state, no more than 9 billion euros can actually be collected. Social security funds are anticipating a total of 1.2 billion euros from debt repayments this year thanks to the new plan, from total arrears of 20 billion euros.

The bill in Parliament, which Prime Minister Alexis Tsipras said on Tuesday would be put before Parliament on Thursday, has been postponed until next week. The official explanation cites a need for technical changes to be made to draft, though it has been suggested that the postponement of the process was decided in order to prevent a reaction from the country’s creditors in this week’s crucial negotiations.