Last-chance saloon for debtors


The government is planning to offer state debtors one last chance to pay up through an arrangement of “extraordinary character,” which will only remain on the table for about two to three months. It is also drafting a settlement mechanism of a permanent character to cover all overdue arrears of individuals and corporations.

This “extraordinary” arrangement is an initiative that the government is keen to implement, having discussed it with the country’s creditors in the second half of the month; the permanent mechanism, on the other hand, constitutes one of the country’s obligations, as the European Union directive on the creation of a “second-chance” framework for debtors will start applying for taxpayers and enterprises from 2020.

The government disputes that it told the creditors it would not proceed with changes to the expired debts arrangement framework in the near future, as the European Semester report of the European Commission claimed this week. Athens’s position, as expressed by a leading government official, is that it has pledged to proceed without taking the creditors by surprise.

In any case, the government appears to have abandoned any thoughts of an “open” arrangement, which would be in full contravention of the 2015 law that binds the country against any such action.

The extraordinary arrangement will need to adhere to the following rules: It should not allow the participation of strategic defaulters; it should rule out the transfer of debtors from old settlement mechanisms to the extraordinary one; it must ensure each payment plan can be carried out by the debtor; and it should not put the year’s revenue targets at risk.

Planning for the permanent settlement system is set to start at a later stage, so that the mechanism will be ready by the end of the year. The objective here is to offer an integrated framework covering all expired dues – i.e. to the tax authorities, social security funds, local authorities and banks – as the EU directive dictates.