Partial payments costing more

The payments freeze that has been all but declared by Finance Ministry is leading to a swelling of overdue payments by the various state departments and agencies, further starving the market of precious liquidity.

The decision was nonetheless adopted in view of the fact that the central government is projected to run out of cash by mid-October, and because the troika of international creditors seems determined not to give the green light to the disbursement of the sorely needed instalment of 8 billion euros without effective new revenue measures.

The payments freeze excludes salaries and pensions.

"We are trying to ensure that the government will be able to continue functioning without problems," Deputy Finance Minister Filippos Sachinidis said on Monday.

Overdue payments by various government entities (hospitals, social insurance funds and local government) were estimated at 6.5 billion euros in July. A continuation of the payments freeze will obviously increase their arrears further.

Sources said the troika notified the government on Saturday that its representatives will not return to Athens if the new measures are not adopted by the Cabinet and the ruling party's parliamentary group. These measures, which the troika demands be implemented in the next few weeks, include further pay cuts in the public sector, changes in the labor market and the creation of a "labor standby" scheme for surplus public servants.

According to data released by the Finance Ministry on Monday, the budget deficit widened to 18.6 billion euros in the January-August period from 15.7 billion a year earlier - a 22.5 per cent increase.

Ordinary budget revenue fell to 31.1 billion euros from 32.8 billion while spending rose to 47.8 billion euros from 43.5 billion.

The recent figures, showing a further deterioration, along with increasing concern and speculation abroad that Greece will eventually default, are sending the costs of insuring Greek debt sky-high. The 10-year Greek bond spread climbed to 2,072 basis points, while the five-year Greek credit default swap ascended to 3,508 basis points, compared to 1,238 for Portugal, 1,175 for Venezuela and 918 for Ireland.

Source: Kathimerini