The Finance Ministry is planning a new scheme for the settlement of outstanding debts to the state in 100 or 120 installments, fearing the accumulation of a new generation of arrears due to the health crisis.
Payments are due to restart as of May 2021 and the government is concerned as it appears impossible for the entire volume of the new arrears to be serviced in 12 or even 24 monthly tranches, as is the case with the special arrangement introduced for the debts run up during the pandemic.
The market is putting pressure on the government for new debt repayment plans or even write-offs, and it appears the ministry is preparing a new settlement plan that see debts being paid off in 100-120 tranches – which could even include debts created before the pandemic hit. The government’s final decisions are not expected before next year.
In any case, before any decisions are made, the country’s creditors will be informed about the government’s intentions; however, the creditors oppose any arrangements that would favor debtors as they don’t want to see an increase in the stock of expired dues.
The government has in its hands the statistics from the latest 120-tranche plan, introduced by the SYRIZA government and improved by the New Democracy administration, which shows an increase in the collection of past debts and a major drop in the rate of new debt creation.
At the same time the creditors realize that in such a difficult period, with many companies facing the threat of closure, it will be hard for all the 2020 debts to be repaid in 12 or 24 installments along with servicing the ongoing obligations of 2021 or 2022, at a time when companies that have been hurt will be trying to make a new start.
So far, debts to the tax authorities and the social security funds exceed 140 billion euros. Unless the government proceeds with a generous arrangement, these arrears will grow considerably, leading to new instances of bank accounts being frozen or seized. Finance Ministry sources now put the estimated increase in arrears to the state at €5 billion.