International

Greek cash to last into June, no EU deal imminent

A woman walk past Greek flags for sale in central Athens, on Wednesday, April 22, 2015. (AP Photo/Petros Giannakouris)

ATHENS/BRUSSELS: Greece can scrape together enough cash to meet its payment obligations until June, eurozone and Greek officials said Wednesday, playing down fears of an imminent default as hopes receded of a deal with its creditors to release fresh aid.

Sources familiar with European Central Bank policy meanwhile denied a report that the ECB had tightened the screws on Greek banks by slashing the value of the collateral they present to receive emergency funding to keep themselves afloat.

Greece has received two international bailouts worth 240 billion euros since 2010 but its economy has shrunk by some 25 percent, unemployment has soared and a leftist-led government elected in January has refused to complete a reform program that includes measures it says worsen the economic slump.

The head of the Eurogroup Working Group, which prepares decisions for eurozone finance ministers, said Athens would not present a new list of economic reforms required to unlock further EU funds when the ministers meet in Latvia Friday, but Greece should be able to stay solvent till June.

“The liquidity situation in Greece is already a little tight, but it should be sufficient into June,” EWG chairman Thomas Wieser told Austrian broadcaster ORF.

Greek Deputy Finance Minister Dimitris Mardas said the government aimed to have a 2.5 billion euro ($2.7 billion) cash buffer by forcing state entities to lend to the state in order to cover payments until the end of May.

Shut out of bond markets and running out of money to pay civil servants, pensioners and suppliers and service its debt, the government issued a decree Monday ordering public bodies to transfer their spare cash to the central bank.

“I want this 2.5 billion euros to cover any needs that may occur, I repeat, taking into account the worst case scenarios and the needs for May,” Mardas told Star TV, adding he was confident that Greece and its lenders would reach a deal.

Mardas said the state was initially still short 350-400 million euros to cover wage, pension and other needs in April but the problem was later solved because a pension fund came forward to lend it the money.

He dismissed a report that Athens was considering a parallel currency or IOUs to make payments, saying he was confident a deal would be struck with creditors to avoid a default.

Greece has to make two repayments to the IMF totaling about 950 million euros by May 12.

Amid fears that the country might crash out of the eurozone, Greek bond yields have risen to their highest levels since a 2012 debt restructuring with private bondholders. But the latest tension has had little impact on the borrowing costs of the bloc’s other heavily indebted countries.

Eurozone officials said progress in negotiations with Athens on the reform program was painfully slow and EU experts were still being denied access to detailed information including public accounts data. But they said things were moving slowly in the right direction.

“It is my central belief that the negotiations with Greece can still be successfully completed,” Wieser said. “The clock is ticking. There won’t be a new list in Riga, but over the course of May it must finally be reached.”

Eurozone officials had originally expected the reform list to be presented in time for Friday’s informal ministerial session, but such hopes have evaporated.

Prime Minister Alexis Tsipras will meet German Chancellor Angela Merkel in Brussels on the sidelines of a European Union summit on migration Thursday. EU officials said his government continued to seek a political deal to ease austerity rather than a detailed technical agreement on reforms.

State Minister Nikos Pappas, one of the closest aides of Tsipras, said the government would continue to reject EU/IMF demands for pension cuts and an increase in value added tax on Greek tourist islands. Athens wanted a deal with its lenders but “not just any agreement,” he told a parliamentary committee.

On the other side, EU officials said eurozone governments had rarely been so united in refusing to yield to what they perceive as Greek brinkmanship and hints of default.

“We all know that in Riga nothing will be achieved. But having the outcome of Riga as a disaster or as a stepping stone to something else makes a difference,” said one senior EU aide with five years’ experience negotiating with Athens.

“Everyone is putting as much pressure as possible on Greece to make some last-minute effort before the meeting,” he said, adding: “I’m concerned that everyone comes out at Riga saying there was nothing. Then we are even closer to the abyss.”

Three people familiar with ECB policy denied a New York Times report that the ECB had raised the average “haircut” on Greek banks’ collateral to 50 percent from around 33 percent, forcing them to deposit more assets in return for Emergency Lending Assistance (ELA) from the Greek central bank.

 
A version of this article appeared in the print edition of The Daily Star on April 23, 2015, on page 6.

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