ATHENS/BRUSSELS: Greece can scrape together enough cash to meet its payment obligations into June, eurozone and Greek officials said yesterday, playing down fears of an imminent default as hopes receded of a deal with its creditors to release fresh aid.
The European Central Bank raised its ceiling on emergency lending by the Greek central bank to Greek banks by ¤1.5bn to ¤75.4bn, giving them a bigger buffer to cope with deposit withdrawals, a banking source said.
Three sources familiar with ECB thinking denied a report that the Frankfurt-based bank had tightened the screws on Greek banks by slashing the value of the collateral they must present to receive emergency liquidity to stay afloat.
Greece has received two international bailouts worth ¤240bn 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 programme 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 on 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 ¤2.5bn ($2.7bn) 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 on Monday ordering public bodies to transfer their spare cash to the central bank.
“I want this ¤2.5bn 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 initially the state was still short ¤350-400m to cover wage, pension and other needs in April but later said the problem had been solved because a pension fund had come 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 totalling about ¤950m by May 12. It has another ¤1.45bn payment due to the IMF in June, but the biggest looming payments are bond redemptions to the ECB of ¤4.18bn in July and ¤3.38bn in August.
In order to receive some ¤7.2bn left in its bailout, Athens must complete an agreed reform programme to the satisfaction of EU, IMF and ECB experts.
Amid fears that the country might crash out of the eurozone, Greek bond yields have risen to their highest levels since a debt restructuring with private bondholders in 2012. 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 talks with Athens on reforms was painfully slow and EU experts were still being denied access to detailed information including public accounts data. But they said things were moving 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 ministerial session, but such hopes have evaporated.
Prime Minister Alexis Tsipras will meet German Chancellor Angela Merkel in Brussels on 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, a close aide 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.
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.
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 Liquidity Assistance from the Greek central bank.
The ECB’s Governing Council took no such decision in its weekly teleconference on Greek ELA on Wednesday, a source said.
Reuters
