Anxiety for a 10%+ deficit for this year, too…

Skeletons in the state funds discovered by the Troika and the economic crisis are threatening to blow up predictions for 9,4% (of GDP) state deficit for this year. The economy team are giving it everything they've got to receive as much as possible in 10 days, while at the same time trying to cover as much as possible from the unpaid state debts, which the auditors warn will add to the deficit of this year.

Especially for the collection of revenue, the government is betting a lot on the Financial and Economic Crime Unit (SDOE) and their controls during the festive season. However, uncertainties are numerous, as this year's December already tends to emerge as the worst in recent years, for the entire market and consequently the state.

Moreover, it remains unknown whether the additional revenue from car tax and semi-outdoor spaces will be received, due to the unprecedented lack of liquidity.  

At the same time, the standard “I’m-not-paying!” tactic of governments tends to turn into a fiasco. Their practice of hiding state debts under the carpet to convince the public that they are diminishing the deficit is no longer accepted by the auditors, who threaten to "drop the books" of the state because of the data presented by the government.  

The shrewd Europeans were suspicious early on and set a term in the Memorandum that the state must not delay its payments over 90 days maximum. At the last audit they insisted on this matter and discovered “hidden debts” of more than 1,7bil euros, which the government refuses to pay to avoid burdening the deficit.

The above is described in the final report published by the auditors (under Troika tough guy Servaas Deroose), which was handed to Olli Rehn to form the basis of the recommendation by the European Commission to member states, to approve the third loan installment for our country. Everything points to the notion that the decision to grant it to our country has already been taken on the political level, but the auditors will not turn a blind eye to the virtual “decreases” of debts and will soon ask us to cover them with added measures.
 

The repayment of old debts is a “thorn”

While the suppliers of the state are up in arms and the state is delaying to meet obligations of any kind (from the lump sum for state employees to grants) for months or years, thus exacerbating the financial crunch in the country, the auditors have caught the bull by its horns and, after personal investigation, discovered the size of the problem.

On page 10 (of a total of 131) of their report, they state that «the team of auditors noted that achieving the goal for the reduction of the deficit must not be attempted through an additional increase of delayed debts. From the beginning of 2010, arrears have increased by at least 1,7bil euros up to September 2010».

It is noted that this sum is not considered to be a new obligation created after September 2010, since the state is able to move it to the 2011 budget (using the term about the 90+ days for repayment).

What does it all mean? it means that the “contrary”  to the Memorandum decrease of the deficit might lead to a new revision of the information supplied by the government. It means that whatever the state can’t pay from the 1,7bil by the end of the year will encumber the 2011 deficit, which will probably increase even by 0,8% of the GDP from the 9,4% aim (equal to the rate of the 2010 deficit and the deficit revision of 2009), consequently exceeding 10% of the GDP.  

So the State General Accounting Office is in a race to eliminate – as much as possible – the delayed national debts of the state, while they have set strict rules to avoid amassing new debts, and respond to the Memorandum by “cleansing” the backlog before 2010 expires.

Even though this is the target for 2010, new debts arise constantly, the state’s liquidity is at its limit and the ministry of Finance is anticipating the 2010 deficit recording with awe, since everything shows that the 9,4% prediction will be confirmed and the Troika will ask for more safeguards for covering the deviations in the next year.