Greek Prime Minister Alexis Tsipras sent a strong anti-austerity message to the country’s parliament yesterday. However, in a blow to Syriza’s solidarity, the party’s chief economist Yiannis Milios left his post.
“People have asked us to put an end to austerity and bailout agreements, to begin the process of reclaiming the dignity of the nation,” Tsipras said. “Elected officials will negotiate with elected officials and technocrats will deal with technocrats.”
Tsipras is due to meet German Chancellor Angela Merkel on Monday with a series of reforms, hoping to be granted access to urgently needed financing. “We have the impression, and everyone who is dealing with the question shares the impression, that time is running out for Greece. They obviously have certain problems,” said Germany’s finance minister Wolfgang Schaeuble.
The Greek government is running out of money. Yet it yesterday managed to roll over €1bn (£700m) of short- term debt for three months. Meanwhile, the government’s finances are straining the banking system in two different ways. The banks own substantial amounts of government debt and the Greek finance ministry’s liquidity squeeze is putting them in danger of insolvency.
Second, state-held deposits are running low, according to banking analysts at Moody’s, increasing the need for banks to borrow from the emergency lending facility at Greece’s central bank.
“On the deposit front, although private-sector deposit outflows have eased significantly in March, there are some deposit outflows from state-owned entities that also affect banks’ liquidity and force them to request additional emergency liquidity assistance (ELA),” Moody’s senior credit officer Nondas Nicoloides told City A.M.
However, the ELA is capped – with banks perilously close to the limit. If the limit is reached and not extended by the European Central Bank then the banks will have to decline deposit withdrawals.