The much-needed flow of cash into the market has been reduced to a minimum due to ministerial insufficiency, bureaucracy and the personal ambitions of a number of tax officers, despite the system of arrears repayment agreed to. The photograph above is from Agnanta, near Arta in western Greece.
Ministers’ inability to respond to the new reality, along with bureaucratic procedures and certain individuals placing their own personal goals above the public interest are the main reasons why the market is still waiting to receive much-needed cash owed to it by the state.
From the end of December, when funds from the bailout package started flowing back into Greece, up to the end of January, the state repaid just 1.003 billion euros of its obligations, while some 4 billion euros remained outstanding. At the end of last year, the state’s disposable cash stood at 5.9 billion euros; it has since dropped to an estimated 4 billion euros.
The public administration is once again proving that it is unable to rise to the occasion and secure the smooth supply of cash to the market. Although specific rules have been set for the repayment of arrears and the General State Accounting Office has signed memorandums with ministries, they are not being followed.
The Finance Ministry argues that the government is keeping to its schedule, which provides for the repayment of 3.5 billion euros in the first quarter of 2013, and 1.5 billion in each of the three remaining quarters. However, that does not mean that the money is reaching those it should. The Accounting Office might be signing the payment orders, but red tape, ministry staff shortages and the ambitions of certain tax office directors to show they are doing an improved job have resulted in the market being deprived of vital liquidity.
For instance, last month tax offices returned a mere 43 million euros to taxpayers, against a target for 311 million. Furthermore, although the Accounting Office had approved the disbursement of 962.03 million euros in state arrears to third parties, only 140 million was repaid. In December the equivalent figures had reached 396 million euros for tax refunds and 467 million for arrears payment.
The main factors in this situation are the political system, bureaucracy and the tax offices. At the Finance Ministry numerous ministerial demands have been submitted for the repayment of debts which are missing key documents required by the memorandums signed with the Accounting Office. The ministry is also very reluctant to increase the budget of ministries, as would happen before the crisis, due to the fact that any divergence would entail additional fiscal measures.
Red tape remains a huge barrier, as hardly any ministry has managed to set up the mechanisms that would rapidly channel funds where they should go. Tax offices are also a big problem, as demands for value-added tax refunds are piling up on desks.