The state’s credibility deficit

It has become clear to everyone involved that under the pressure of the financial commitments imposed on it by the joint EU-IMF memorandum, the Greek state has stopped paying the people to whom it owes money. In other words, the state has been unable to meet its financial obligations to suppliers and companies that are still awaiting the return of promised value-added tax. This suspension of rebates has created huge problems for the market. At the same time, it is a deep embarrassment and has helped to reinforce the image of an unreliable state. The Socialist administration of PM George Papandreou ought to be clear about the magnitude of these unmet obligations. Moreover, it must explain whether the above data have in fact been taken into account in those rosy deficit forecasts. Finally, it must let the business community know when it will resume payments. This is about restoring the state’s credibility and reinstating a climate of confidence in the local market, which is on the verge of default.

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