The news announced on
September 1st 2010 that the government is assuming responsibility for the Hellenic Agricultural Insurance Organisation’s (ELGA) debt of EUR 3.8 bln was yet another indication that ’s public debt will swell far higher than its deficit this year. Greece
As part of its fiscal restructuring plan, the government is either choosing to or being forced to take on the debt of a number of semi-governmental organisations (DEKO), such as the Hellenic Railroad Organisation. By my count, which is certainly incomplete,
will have “added” the following debt in 2010: Greece
· EUR 3.8 bln ELGA
· EUR 6 bln healthcare settlement
· EUR 10 bln OSE debt assumption
· EUR 2 bln other public organisations, guaranteed by the government
· EUR 15 bln government deficit (this is my assumption: the government needs EUR 25-26 bln in revenue to make up the Memorandum targets this year, but has delayed payments to a number of beneficiaries, so the net revenue estimates probably do not portray the true situation).
Total Debt Assumption: EUR 36.8 bln in 2010
I am not certain if the EUR 6 bln in the healthcare settlement is already on the debt books or not. By the same token, it is impossible to know if the ELGA debt was already counted on
’s central government debt balance, or within its wider public sector debt. Judging by the language used Greece
The most recent estimate available for central government debt is provided by the Greek public debt management agency, which provides a 31.03.10 figure for central government debt of EUR 310.4 bln.
It is difficult to understand whether the healthcare settlement is included in this or not: the healthcare announcement was made on 16.06.2010, so presumably it is not. Similarly, the OSE announcement (26.06.10) and the ELGA announcement (01.09.10) would also not be included in the EUR 310.4 bln estimate.
There is currently another EUR 1.2 bln in unpaid healthcare debt this year, while certain payments due for military procurement, public sector construction, public sector staff salaries, and certain pension funds are also rising and have apparently not been made.
’s debt on 31.03.2010 was EUR 310 bln, by the end of 2010, we can assume that total debt will have risen to EUR 347.2 bln. Greece
Taking into account a forecast GDP decline of 5% (my estimate),
’s GDP will be EUR 225 bln, and its debt:GDP ratio will be 154%. Greece
Of course, tax collection may improve, expenditure may fall further, absorption of EU funds, and privatisations may occur, reducing the overall debt load. But this is difficult to imagine given the current economic conditions. Exacerbating the situation is the fact that much ministerial activity appears to have stalled over the issue of impending regional and local election, while the prospect of rapid absorption of EU funds has been tossed about for months now, but has not occurred.
It is impossible to know how much other “hidden public debt” is in the system. The IMF recently announced that a Greek default was “unnecessary, undesirably, and unlikely”. While I hope they are right, I can’t help but question the data and assumptions they are using, since we are being treated to constantly changing numbers and lack the basic composition of
’s public debt. Greece