Halt in payments stifles market

Collapsing tax revenues combined with another reduction in the Public Investments Program and 2 billion euros of state spending that was never made, have created market-suffocating conditions that are leading the Greek economy back into recession, budget data for the first four months of the year showed on Monday.

The figures published by the Finance Ministry pointed to a number of problems created by the government’s decision to halt payments on several fronts, leading to a primary budget surplus of 2.1 billion euros against a forecast for 310 million euros.

A statement by the General State Accounting Office, in fact, said that the “reduced amount of expenditure is manly due to the restructuring of the cash spending program based on prevailing liquidity conditions,” referring to state coffers, which are fast running dry.

The halt in payments has been so severe, the figures show, that old and new hospital debt servicing to suppliers came to just 63 million euros in the year to end-April, against an annual target of 1.1 billion euros and 631 million euros paid out in the first four months of 2014. At the same time, spending in the Public Investments Program has been slashed by 409 million euros, resulting in numerous projects coming to a halt.

Tax revenues showed a shortfall of 884 million euros, the bulk of which (625 million) is attributed to lagging direct taxes and 259 million to the decline in indirect tax revenues. A similar trajectory has also been observed in the first 20 days of May.

The ministry’s data further reveal major containment in expenditure by 2 billion euros in January-April 2015. Most of this amount (1.45 billion euros) concerns primary spending, showing that the government has simply failed to fulfill its obligations in the first four months of the year.

However, this is a problem that the government will have to address in the coming months, and particularly in the second half of the year, as these obligations will have to be covered sooner or later.

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