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Debts suffocate the Greek economy

30 June 2014 / 12:06:27  GRReporter
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The overdue debts on the part of households and companies to banks, insurance funds and the treasury, totalling 159 billion euro or 87% of GDP, will end up on the negotiating table between the government and the supervisory Troika.

This nightmarish situation resulting from the forced contraction of business activities and incomes over the past four years is a barrier to every attempt at economic recovery. The huge private debt is a threat to the viability of households and companies, the state budget, and the capital adequacy of the banks and the insurance system.

During the forthcoming visit of the Troika in mid-July, the government will place before the lenders the request for a new regulation of the debts to the treasury and the insurance funds, and for paying them in more instalments until their upward trend stops. The government will also present the plan of the Bank of Greece to settle the bank loans to companies and households. Repaying these debts in the near future without taking measures is considered unattainable, since such a thing implies the return of the economy to rapid growth and a significant increase in incomes.

The existing debts reported to date from official sources are as follows:

1. Based on the official data of the Ministry of Finance, as of 31 May 2014, the overdue debts to the treasury amounted to 66.4 billion euro.

2. According to governor of the Bank of Greece Yiannis Stournaras, the loans "in the red", i.e. loans that are no longer paid by individual or legal persons, amounted to 77 billion euro.

3. The overdue payments to insurance funds amounted to 15.5 billion euro as shown by the latest data of the Federation of Insurance Employees Union.

The total amount of the overdue payments is an astronomical 158.9 billion euro (or 87.3% of GDP), resulting in blocking the activity of thousands of companies and the financial operations of thousands of households.

The significant increase in the overdue debts in the three categories is due to the following factors:  the deep recession that has led to a 21% loss of GDP or 51 billion euro since 2008, the 30%-35% shrinking of incomes, the closure of 900,000 jobs and the further reduction in the disposable income because of the high taxes levied on incomes and real estate.

Tags: Overdue paymentsInsurance fundsGDPNegotiationsSupervisory Troika
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