Ministries urged to limit spending to bare necessities (Updated)

The finance ministry has issued a circular to all ministries asking them to limit spending to the bare necessities after the rejection of the state budget by parliament.

The circular, signed by finance ministry permanent secretary Giorgos Panteli, said the government was only permitted to spend €603m – one-twelfth of 2020’s budget – and spending by ministries should be guided by consideration and austerity.

Considering the parliament’s decision, and until the 2021 budget is approved, no new commitment should be made and no demand entailing long-term commitment should be submitted to the finance ministry, the circular said.

Public sector appointments starting on January 1, 2021 will be filled provided there is enough money.

After the spending limits are defined for January, funds can only be transferred from articles in the same group of expenses.

Funds approved in 2020 to be used in fighting the Covid pandemic are exempted, Panteli said, provided they do not exceed the approved €62.1m.

Ministries were also advised not to submit any requests to be included in the new budget that is currently being prepared.

“It is noted that only absolutely necessary changes will be incorporated,” the circular said.

The government is forced to operate on a shoestring after parliament – for the first time ever – vetoed the 2021 state budget.

At the House plenum on December 17, the budget bill was defeated by 29 votes against to 24 in favour.

Finance Minister Constantinos Petrides later said the budget’s rejection – due to political bickering over other matters – could not have come at a worse time.

A great deal of the funds had consisted of financial relief earmarked for businesses and households straining under the coronavirus-related restrictions.

Petrides noted that passing the budget would have gone a long way toward helping the economy rebound after the recession this year, as the government grew its balance sheet by €742 million compared to 2020.

Despite rejecting the budget, parliament did green-light expenditures for the month of January – a contingency that allows the state to carry on functioning.

But these contingency expenditures – known as ‘twelfths’ – cannot exceed the equivalent for each month of the previous year. Moreover, this back-up arrangement can run only for two months, until the end of February.

The government does have the option of bringing an amended budget bill to parliament once it reconvenes in the new year.

In the worst-case scenario – assuming the new budget bill were to be likewise defeated – after February the state wouldn’t be able execute any payments whatsoever on any item, save for paying the salaries of a small group of state officials.