Subtranche payment gets unlikely


The government continues to run up fresh debts, creating huge problems for the market, which is struggling to cope with higher tax and social security obligations. It will also be very difficult for Athens to reach the debt repayment target that would allow for the release of the pending bailout subtranche of 800 million euros.

Since this government took over in January 2015 it has been creating a new debt of 1.6 euros for every euro it pays back: Although it has paid off debts of 3.8 billion euros, it has created new ones totaling 6 billion euros.

Based on the statistics issued by the State General Accounting Office, it appears that it will be exceptionally difficult for the government to meet the requirement of 1.2 billion euros in paid-off debts by October 31 for the disbursement of the subtranche, which has been pending since the second bailout review.

At the end of August, expired debts owed by the state to third parties (payments to suppliers, tax rebates etc) rose to 6.026 billion euros, from 5.438 billion at end-July. The additional 588 million mainly concerned tax rebates. Data from the Independent Authority for Public Revenue showed that last month the state paid out tax rebates totaling 670 million, so the balance of the state debts only showed a minor change.

Finance Ministry officials say that even if the deadline is not met, the subtranche could be disbursed later. They add that they will gather all available payment documents by October 23 and present them at the October 28 Euro Working Group meeting, which will decide on whether to release the funds.

If the October 31 deadline is missed, it will take a new decision by the governing board of the European Stability Mechanism – consisting of eurozone finance ministers – for the disbursement of the 800 million.

“It will be a missed chance,” a source from the creditors commented, noting that the money will revert to the general budget of the program. Until the ministers reach a new decision, more debts may well be created. Sources say the issue may be discussed on the fringes of Monday’s Eurogroup meeting.