Government’s all-out effort to lower debt

The government is expected to resort to an array of ruses in the remaining three working days of the year in order to reduce the public debt by 500 million euros. Sometime next week, the government is expected to complete the transfer of a 2 percent stake in the National Bank of Greece from state portfolio company DEKA to the Social Security Foundation (IKA). This transfer had been decided long in advance, but the need is to close the books and show the debt at the level – about 100 percent of the gross domestic product (GDP) – forecast by the government in its regularly updated reports to the European Commission. The State will swap the National Bank shares with IKA bonds worth 100 million euros. A few days ago, Economy and Finance Minister Nikos Christodoulakis reduced the equity capital of Postal Savings Bank by 345 million euros, wiping out a similar amount of state debt from the books. The government recently turned the Postal Savings Bank, a subsidiary of the Post Office, into a corporation, hoping to privatize it. Despite the appeal of the small bank to prospective buyers, mainly through its considerable portfolio of mortgage loans, the privatization has been stalled because of opposition on the part of employees. Another tool used in the closing days of the year by the Economy and Finance Ministry is debt swap operations, in which it borrows a certain – usually considerable – amount of money in order to buy treasury bonds for a week. These tools are not illegal, and are used by other finance ministries around the world. However, some of the tools Greece, and other countries, used to swap debt, such as share-convertible certificates, they were forced to include in the debt by the European Union’s statistics service, Eurostat. As a result, Greece’s public debt rose from about 100 percent to nearly 107 percent of GDP in 2001, and its 2001 budget, touted by the government as the first surplus budget in many decades, slipped back into deficit. The government is still awaiting the result of Eurostat’s recent investigation into its armaments programs, which critics have charged provide yet another excuse to hide the country’s real debt level.