Greek debt deadline: Greece raids cash piles to stay afloat

Disagreements remain over privatisations, labour market reforms and pension cuts (Source: Getty)
The Greek government is forcing public sector bodies to hand over their cash reserves, as it tries to avoid running out of money while talks with international lenders drag on.

The struggling Mediterranean state faces payments totalling nearly €1bn (£720m) in the first two weeks of May, as well as €1.7bn of public sector wages at the end of this month.

Deputy finance ministers are due to meet tomorrow, ahead of a Eurogroup meeting on Friday, as Greece and its creditors endeavour to reach an agreement that would unlock the next tranche of the country’s bailout fund. Greece and its lenders in Brussels and at the IMF are at loggerheads over some conditions that would be attached to any new loan.

Disagreements remain over privatisations, labour market reforms and pension cuts. The coalition, dominated by the left-wing Syriza party, does not want to agree to further liberalisations of the labour market such as reducing the minimum wage, and contends that pensions are already low.

The government also does not want to privatise state-owned assets while the economy is weak and asset prices are low.

The situation could result in new Greek elections being called by June, analysts at RBS said yesterday.

“We expect an escalation of the Greek crisis in the weeks ahead with no deal likely in the short-term and increasing pressure upon the Greek government to find a deal,” they said.

Berenberg economist Holger Schmieding added that, in holding out for a better deal, Greece could shoot itself in the foot. “Alexis Tsipras has to make up his mind: Europe is not going to make a much better offer, he either has to accept it or not. Even if they can hold out until June or July, it doesn’t really change anything; by infuriating everybody they’d probably get a worse deal.”

However, Gabriel Sterne of Oxford Economics told City A.M. that there could be more delaying tactics. “I wouldn’t be surprised to see further last-ditch cash grabs by the Greek government. Desperate times call for desperate measures,” he said.

Yesterday’s decree was issued via a government website. Local media reports said that the government could tap up to €3bn in cash reserves. Research group MacroPolis cited government sources saying that the transfers would be utilised for a short period, up to two weeks, and would earn a market-beating interest rate.

A spokesperson for the Greek finance ministry said the move was not exceptional. “The climate is good, there were constructive talks over the weekend,” he added.

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