Government presents cases of ‘hidden debt’ with more to come

The newly elected conservative government, continuing its so-called «audit» of public finances, presented yesterday data on state payments that were postponed until the future in order to provide a rosier picture of the budget deficit and the public debt. Deputy Economy and Finance Minister Petros Doukas told a parliamentary committee yesterday that the former Socialist government had swept under the carpet in a number of ways debt equaling 10.5 billion euros. To this amount, he added 11 billion euros in state loan guarantees. Doukas said that, as a result, previous state financial statements appear dressed up, that is, much better than they actually were, and that the burden has shifted to this year’s, and future, budgets. The biggest outstanding payments concern interest payments on the debt, state hospital debts, and state debt to the Agricultural Bank of Greece, local authorities and social security funds. By far the largest debt involves interest payments on debt, in the form of bonds, that were supposed to have be made between 1995 and 2000. The interest payments involved were to the tune of 6.8 billion euros. The payment was postponed through the issuing of new bonds with a later date of maturity. The amount remaining to be paid is 5.2 billion euros, of which 1.4 billion must be paid by the end of the year. State debts to pharmaceutical companies and for other types of equipment are 2 billion euros. This amount has been accumulated over the past three years, but has not yet been recognized as part of the public debt, as the audit procedure has not been completed yet. To be inserted into the debt, a law must be passed acknowledging the amount as part of public debt. Similarly, state debt to local authorities and social security funds «exceeding 1 billion euros» has not yet entered the public debt. The state owes Agricultural Bank at least 700 million euros, some of which is guarantees on loans to farmers who have defaulted on their payments and some as guarantees on emergency payments made to farmers in need. Government ministers have hinted that this amount – 10.5 billion euros – is just the tip of the iceberg and that more «hidden debt» will surface. When in opposition, the current ministers had targeted Nikos Christodoulakis, who served as deputy finance minister from 1996 to 2000 and as economy and finance minister from 2001 to last March, as the «architect of the hidden debt.» He has countered that these operations, and others, such as currency swaps and share-convertible bonds, were nothing unusual. In fact, many other countries used them. Germany, for example, deferred state hospital debts in order to bring its 1998 budget deficit below 3 percent of its gross domestic product (GDP) and thus qualify for membership in the eurozone. Many others among the original 11 eurozone members who joined in January 1999 used similar tricks. In 2002, Eurostat, the European Union’s statistics agency, obliged six member states, Greece among them, to include swaps and share-convertible bonds in their debt. Other operations, such as those described by Doukas, are still considered legitimate debt-management operations. But with the current government hell-bent on proving that its predecessor mismanaged public finances, Eurostat is now focusing on items such as defense expenditures, at the request of the government. As a result of this tactic, Economy and Finance Minister Giorgos Alogoskoufis yesterday accused indirectly officials of the Public Debt Management Agency of borrowing at will. Asked by an opposition MP about a number of loans that were revealed a couple of months after they were made, Alogoskoufis said the responsibility fell on the PDMA, whose officials, he added, were appointed by his Socialist predecessors.