A bridge to the future or a bridge to nowhere?
It was announced last Thursday that due taxes, whose payment had been suspended from March 2020 until now, will remain frozen until the end of the year. We are talking about an accumulated amount of over €2 billion. Earlier this week, a similar decision concerning the pension contributions of companies and independent professionals was announced; that involves some €300 million whose payment was postponed until the end of the year.
We have a situation where revenues are declining and budget expenditure is rising; this is happening during a crisis all over the world. The essential question is what are these extra outlays funding? With what criteria? What plan? For whom? Are we building a bridge to the future or a bridge to nowhere?
Support spending will certainly exceed the €7.5 billion foreseen in the 2021 budget. After the rent for January and February, the state will pay the March rents for retail, cafés, restaurants and other stores, at a cost of €70 million per month or €210 million per quarter. It will also cover a part of businesses’ utility bills (electricity, water, telephone). Lower value-added tax on coffee, beverages and holiday packages has also been extended, at a cost of €125 million. Another €1.5 billion will be spent on the sixth and seventh cycle of refunded prepaid tax, for total spending of €3 billion since the start of the year and €7 billion since the start of the pandemic. The first three cycles of prepaid tax for 2021 will also be subject to a haircut of up to 50%, which means another €1.5 billion in foregone revenue. At the same time, it is impossible to calculate the state’s actual revenues, since several thousand enterprises are zombies: They exist for as long as they are being supported and will never reopen.
Liabilities are being are being postponed for “ad calendas graecas” (never) or “a better day” (that’s how bank deposits are soaring) and private debt is accumulating: According to the latest available data, owed back taxes come to €107.58 billion, a large part involving shuttered businesses. Nonperforming loans are €55 billion and the pandemic will add another €10 billion. Insurance arrears are almost €2.3 billion and arrears to pension funds exceed €35 billion. Payments on about €20 billion worth of loans have been suspended and, every month, €6 billion worth of checks are issued; we are in the third extension. The market is worried about a “bubble of post-dated checks,” another Greek patent.
The government had been banking on gradually decreasing support payments from April. That doesn’t look likely. The pandemic is still raging and the country’s GDP, having shrunk 10% last year, does not look likely to grow beyond 2-3 percent this year. It is popular to demand “more money for more people,” but I think it is wrong. The cost of the lockdown is over €3 billion per month and the state covers over €2 billion of that loss. The major issue is where does all that money go, with what criteria and priorities and what plan? Is it used to support people to feed their families, acquire new skills and improve their prospects? Or is an excessive part of this aid spent on supporting thousands of zombie businesses and unsustainable jobs, worsening the accumulation of a private debt that will undermine the day after?