The unilateral extension of trade credit to the Italian government

An ongoing issue is that the government is simply delaying payments to private suppliers:

Beppe Grillo, leader of the opposition 5-Star Movement, has long hammered on this point. In April, during the post-election interregnum, he’d clamored for “the immediate payment of about €120 billion” that the government and public entities owed the private sector.

The government’s refusal to pay its suppliers violates EU rules. But the EU has soft-pedaled the issue, for two very big reasons: payment of arrears would force Italy to sell a truckload of bonds when there might not be any demand; and it would push the deficit way beyond the 3% line in the sand. Thanks to cash accounting, only actual disbursements make it into the deficit figure. Italy has achieved its “austerity” goals by not paying its suppliers.

There is also this:

…[government] expenditures rose 1.3% in the first quarter, while revenues remained flat.

You can read more here, hat tip Fabrizio Goria.  Right now the Italian state is taking an average of about six months to settle private bills, longest in the EU.  You can think of these delayed payments as a form of anti-stimulus of course.


Comments for this post are closed