So that we do not forget.In Greece, the overwhelming majority of people either have never taken out a loan, or have taken one and repaid it, or have taken one and are repaying it normally.
Indeed, consistent borrowers partly “carry” the burden of those who do not pay for whatever reason, even if they do not know it.
Following the beaten path and with an eye obviously on the elections, Prime Minister Mr. Mitsotakis yesterday announced a new package of measures with an expansion in the number of installments for the repayment of debts to the tax office and social security funds to 120 from 72 with a minimum monthly payment of 30 euros. In fact, the scope of beneficiaries was expanded as overdue debts up to the end of 2024 can be included. In addition, he announced stricter terms in the operation of servicers, setting the maximum down payment limit at 15% of the debt.
For new debts, the standard arrangement of 24 installments remains, but they may possibly be included in the new, more favorable framework of 120 installments, i.e. one decade, in the coming years based on Greek political practice.
Undoubtedly, there are some arguments in favor of such arrangements that are projected especially in our country by the media and politicians. Arrangements help debtors who face objective payment difficulties to cope and avoid auctions. Thus they can settle their debts and join the economy and at the same time the state will be able to collect some money that it would otherwise lose.
However, there are also arguments against such arrangements that usually do not receive the same publicity. First, repeated arrangements reasonably create expectations among debtors that they will be repeated in the future under the same or more favorable terms. Therefore, they create disincentives for payments.
Second, consistent debtors feel like fools and their trust in institutions is undermined. This leads in the medium term to a reduction in compliance.
Third, such arrangements, especially horizontal ones, can have a negative impact on the assessment of the country's creditworthiness, potentially raising the borrowing cost of the state and the private sector.
In Greece, unfortunately, we also have another major problem. Declared incomes fall significantly short of the real ones due to widespread tax evasion, tax theft, and corruption more generally.
This makes even targeted arrangements, i.e. those addressed to the truly weak, problematic. It is not easy to distinguish the truly weak from the strategic defaulter who declares crumbs and appears without assets since he has transferred them or fictitiously sold them to third parties within or outside Greece.
Of course, legal sanctions are provided for in case of violation of the arrangements. However, the Greek experience shows that they were not so effective in deterring such behaviors.
So when we weigh the pros and cons, we cannot help but conclude that repeated debt arrangements help a few but do harm in the medium term to many more and to the national economy.