Greece's Public Sector Arrears Resurface, Revealing Deep Structural Flaws
Despite official assurances of fiscal stability and adequate liquidity, Greece’s public sector is once again falling behind on payments to the private sector—a chronic issue that has plagued the country for years. Recent data reveal that overdue debts have climbed back to levels not seen since the height of the bailout era, raising concerns about the effectiveness of state administration and its impact on the real economy.
As of March 2025, overdue obligations of the Greek state to private entities totaled €2.9 billion, nearly matching the €3.14 billion peak of November 2017. When pending tax refunds are included—amounting to €723 million, with €316 million of that overdue—the total liquidity withheld from the private sector rises to €3.648 billion. This resurgence of arrears is not due to a lack of funds. Greece currently enjoys access to financial resources and is not facing a liquidity crunch. The core issue lies in the state’s inability to process payments efficiently.
The persistence of this problem highlights structural deficiencies that successive governments have failed to address: slow and cumbersome clearance procedures, understaffed agencies, delayed approval workflows, and a lack of modern, integrated IT systems. It is telling that Klaus Regling, the former head of the European Stability Mechanism, dedicated five years to pressing Greek governments to resolve the problem, often conditioning financial support on the settlement of these debts. Yet, despite international oversight, the problem was never fully resolved—and with the withdrawal of the oversight mechanisms, it is now reemerging.
The health sector is the most heavily affected. Public hospitals are responsible for over half of the state’s overdue debts, with liabilities reaching €1.489 billion in March—an increase of €212 million in a single month. In stark contrast, hospital arrears stood at just €326 million in 2017. Since 2023, they have consistently exceeded €1 billion, underscoring the sector’s chronic underperformance.
Other segments of the public sector are also showing signs of deterioration. Local government debt surged to €373 million in March from €280 million in February. Although social security funds slightly reduced their arrears to €582 million, other public entities saw debts rise from €195 million to €227 million. Even the central government’s core institutions—ministries and directly supervised bodies—saw overdue payments jump to €254 million, much of it related to the Public Investment Program.
The challenge now falls to Kyriakos Pierrakakis, Greece’s Minister of National Economy and the former architect of the country’s digital governance platform, gov.gr. His political brand is built on modernizing the state through technology. The question is whether he can now leverage that digital expertise to fix one of the most entrenched dysfunctions in the Greek public sector. In a country where the problem is no longer a lack of money but a failure of execution, the opportunity—and responsibility—to act is clearer than ever.
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