In an open letter to the leaders of the three largest parties, ND, SYRIZA-PS and PASOK-KINAL, the former Minister of Finance, Alekos Papadopoulos sounds the alarm.
The open letter has a title. “The risks of embellishing the fiscal situation”, is published in Kreport and refers to ELSTAT’s announcement of a primary surplus of 273 million euros in 2022 that it characterizes “as supposedly an unprecedented achievementwhile, on the other hand, other important fiscal elements were insufficiently presented or completely silenced”.
The ex-minister quotes the important financial data that was silenced and requests that all discussion of the “success story” be closed. “I deeply believe and allow me to propose the immediate and joint creation of a stable National Fiscal Strategy, even after the elections, as an unavoidable necessity due to the still dangerously weak Greek economy”, is his proposal.
Alekos Papadopoulos’s letter in detail:
“Open letter to the leaders of the three main Greek parties.
Honorable Presidents of New Democracy, SYRIZA-PS, PASOK-KINAL,
I am writing to you with a sense of responsibility, conscience and respect, on the occasion of the recent announcement by ELSTAT, which announced, among other things, that 2022 closed with a primary surplus of 273 million, while, on the contrary, other important fiscal expenditures items were under-presented or muted entirely.
In particular, silence was kept that in 2022:
a) The result of the execution of the Budget was a deficit of 4,727 million.
(b) The amount of public debt in absolute numbers exceeded that at the height of the recent debt crisis in 2011 and reached 356,256 million (171.3% of GDP), the highest since the country entered the euro zone.
(c) The amount of public debt exceeded what it was at the height of the recent debt crisis in 2011 and reached 400,276 million (192.4% of GDP), by far the highest since the country entered in the euro zone.
(d) Government guarantees (potential debt) exceeded 29.8 billion, by far the highest amount since the country’s entry into the euro area.
(e) Real GDP is still below the real GDP of the country before the recent debt crisis (2011 GDP: 194.2 billion, 2022 GDP: 192.1 billion)
(f) The nominal GDP is slightly higher than the nominal GDP the country had before the recent debt crisis (2011 GDP: 203.3 billion, 2022 GDP: 208 billion).
Without disputing the legality of the records and the validity of the ELSTAT data, I point out that the symmetric projection of the above constitutes an attempt to embellish the fiscal situation and the significant political risk of fiscal management the day after the election, regardless of the result. Because the markets and the rating agencies can X-ray the figures with greater precision and demand adjustments that the electorate will not be willing to accept. In this spirit, I want to make a few additional points.
The huge difference (44.1 billion) between public and government debt is particularly impressive and raises reasonable questions. This difference was only 12 billion in 2011 and 25 billion in 2019. Given that the State is only one of the hundreds of organs of the General Government, how is it explained that the public debt is so much less than the national debt?
The answer to this question arises from the comparison of the definitions of public and government debt. The public debt is the total sum of the debts of all the organs of the General Government with third parties (creditors outside the General Government), while the state debt is the total sum of the debts of the State with all its creditors (within and outside the General Government). General Government).
How is it, then, that all the agencies of the General Government together have a much smaller debt than the debt of the State? Apparently, the Ministry of Finance, in order to make the public debt appear less, more than doubled the State’s indebtedness with the Public Administrations and avoided borrowing in the markets for the same amount. Specifically, ODDIX had borrowed 46,700 million from the Bank of Greece on 12.31.2022 with repurchase agreements (repos) available to General Government agencies. This debt is not accounted for in public debt, since in public debt only the State debt to its creditors outside the General Government.
The volumes of public and government debt must be treated with great caution, since at the end of 2022:
(a) There were overdue liabilities pending payment for 1,710 million (and 2,502 million at the end of March 2023).
(b) There were outstanding tax refunds of 658 million.
(c) The payment of expenses amounting to 1,383 million euros has been deferred.
(d) There were pending collateral confiscations of 1,300 million and
(e) possibly many more liabilities of unknown amount.
The huge amounts of public and government debt, its increasingly deteriorated structure (large increase in very short-term debt, repos), as well as the sharp increase in active rates, generate concern about the State’s ability to meet its obligations .
The Government assures that the country’s cash reserves remain at high levels (over what it received in 2019, 36-38 billion) and ensure debt comfort, as well as certainty if difficulties arise. However, some serious and critical questions arise from the above data:
(a) If the cash reserves of general government agencies are 36 to 38 billion, then how was the government able to borrow 46.7 billion on December 31, 2022?
(b) Since the Government has already borrowed and spent all the funds from the General Government agencies, how are they still available to deal with an emergency?
c) Under what conditions did the Government borrow the assets of the insurance funds (Common Capital) of the Bank of Greece? in particular, the cash reserves of the Subsidiary Capitalization Insurance Fund (employee contributions to individual piggy banks announced by the Government) under what conditions did you borrow them?
(d) Is it legitimate for the Government to borrow employee contributions with repurchase agreements (repos) for its cash relief and accounting reduction of public debt?
(e) Who ensures the efficient investment of funds from insurance funds for the benefit of employees and pensioners?
(f) Who represents the interests of employees and pensioners in the repurchase agreements (repos) that ODDIX enters into with the Bank of Greece and borrows their contributions?
(g) Is the Government willing and able to repay the loans from the insurance funds (Common Capital), so that they can be used more efficiently?
The incessantly projected updates, The failure to achieve investment grade means that Greek bonds remain exposed in the speculative category zone and their exceptional purchase by the ECB should not be considered as something given and unconditional. After this, it is evident that the additional debt margin for the country is very limited. Any excess of these spreads or any notable inflation of lending from the markets will inevitably lead to an increase in lending rate risk spreads. Unfortunately, borrowing from the markets seems to be a one-way street for the government and the country, which will most likely end up on a difficult path if expectations are not managed more prudently. With this in mind, an accurate determination of the country’s fiscal situation before the next elections may prevent a repeat of the woes of the traumatic debt crisis.
The continuous and synchronized projection of an optimistic image of the state of public finances does not serve the public interest and it does not allow the citizen to trace and follow a reliable personal and professional path. A recent example, the stormy and synchronized deployment of the relatively insignificant and practically non-existent primary surplus and the disappearance of the multi-billion dollar deficit, as well as the unprecedented inflation of public and sovereign debt. Will this election be an opportunity to discuss the real problems facing our society, or will the same mistakes that led to our recent bankruptcy be repeated?
His responsibility as head of the government parties it will be heavy and unforgivable if the country derails fiscally, within these 10 years or at the beginning of the next one under the weight of repeated irresponsible and misguided expansionary policies.
I firmly believe and let me recommend you. the immediate and joint establishment of a stable National Fiscal Strategy, even after the elections, as an unavoidable necessity due to the still dangerously weak Greek economy.
I believe that these and many other irrefutable and useful facts about the real state of the Greek economy compel you, as the head of the ruling parties, to follow this inevitable, painful, personal and political one-way road.
Alekos Papadopoulos, former Minister of Finance”.
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