Apparently, it's when you refuse to supply a customer when they haven't paid you for FIVE years.
Here's the deal the Greek government recently offered hospital suppliers, to whom we owe EUR5.6bn:
- We'll pay you EUR230m in cash.
- The other EUR5.27bn will be paid in zero-coupon bonds. That's Greek Government bonds that pay zero interest. The kind recently downgraded by a second credit rating agency, which means they are likely to land you with a nasty loss if you sell them for cash, and equally likely to land you with a nasty haircut if you hold them to maturity.
- So to be very clear. In return for putting up with 5 YEARS of deferred payments - credit terms that would be unacceptable to a stunt codpiece - we we make you give us a 19% discount AND lend us money to boot.
This means that we now have a Third World country's public health infrastructure, to match our Third World fiscal figures. This, my friends, is crunch time - the make-or-break moment when our Government can doom the country forever or lead the way back to sanity (although we will still end up defaulting). Cue an inspirational and reassuring statement from our health minister, Mariliza MUPPET Xenogiannakopoulou. More here and here. I translate below:
"The Government and the State will not be blackmailed. We will push through with this settlement, because we have an obligation to restore sanity to the Healthcare sector, but everyone has to finally get the message: the party is over."
"Unfortunately these days we see a double blackmail being carried out, against the National Health System and, ultimately, the Greek people. While the Government has proven that we mean what we've been saying all along, namely that we will do a deal and settle the debts of the past, which as you know we took over upon coming into government, as they date back to the 2005-09 period, we see this double blackmail taking place."
"On the one hand, one share of suppliers, who do not accept the terms of the settlement, and on the other those who do not want the new rules we're imposing to come into effect, so that order, proper oversight and lower prices can be brought to the market for consumables."
"It is inconceivable that they refuse to accept the settlement. They made a lot of money in the past few years. We know about their surcharges. There will be rules. We are fighting every day."
The lack of humility is staggering. It doesn't matter one jot to our suppliers that Mariliza didn't run up the debt herself - she's the person holding the bill, and her other hand is empty. That's the continuity of government for you. But most perverse of all is the lack of any concept of supplier cashflow, or the basic rules of credit. Anyone ever run a small business over in the Ministry of Health? Surcharges are par for the course if you insist on ludicrous terms of credit. Except of course small businesses (or medium-sized ones, or even most large ones) can't get away with 5 years. Well now we can't either. Because our debt is junk.
Here's a statement that will please me: here's the bonds, folks. If you take them and we default, we will back them up with a stake in the actual hospitals you supply. Happy? Thought so. Since we're never going to default anyway (right??) that's a win-win. We get our better terms and they get peace of mind.
Over to you Mariliza.
UPDATE: People have finally cought on to the fact that the restructuring of Greek hospital debt is tantamount to default. H/T To Nick Shay for pointing out this story.