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Greece orders raid on state funds in scramble to pay bills

Euro & Finance

Greece orders raid on state funds in scramble to pay bills

Greece protests.jpg

Greece ordered state entities from municipalities to park idle cash at the central bank in a scramble on Monday to pay the country’s bills.

With IMF loan repayments due next month, Greece has been tapping into public cash reserves in temporary transactions.

The latest demand shows how extreme the financial constraints on Greek Prime Minister Alexis Tsipras have become as he tries to convince foreign creditors to extend new financial aid.

>> Read: Tsipras turns to Orthodox Church to boost state coffers

Monday’s legislative order includes local administration but excludes pension funds and some state-owned firms. Cash reserves that are needed by these bodies for their immediate payment needs are also excluded from the regulation.

Raising pressure on the government, local officials threatened to defy the decision, which needs parliamentary approval. Most opposition parties said the decision was arbitrary.

“The government’s despair in an effort to find available cash is so great that it doesn’t even respect the constitution,” said conservative lawmaker and former administrative reform minister Kyriakos Mitsotakis.

He urged a swift deal with Greece’s official lenders, who have so far dismissed government plans as vague and inadequate.

”Greece must take its responsibilities,” French Finance Minister Michel Sapin told BFM TV. “Greece must go faster now. We’re wasting time and time is precious on this matter.”

The latest effort to harness spare cash means parking money that a public body does not need immediately at the Bank of Greece. The money is lent to the debt agency for one to 15 days against collateral and is paid back with interest at expiry.

Greek finance ministry officials told Reuters last week that Athens will need to tap all the remaining cash reserves across its public sector, a total of €2 billion, to pay civil service wages and pensions at the end of the month. The finance ministry denied this.

Greece must repay the International Monetary Fund almost €1 billion due next month. Athens has said it wants to honour its debt obligations but government officials have said that wages and pensions would be a priority.

Tsipras needs to present detailed plans to reform the economy before a meeting of eurozone finance ministers in Riga on 24 April to prevent a default which could trigger a ‘Grexit’ from the euro.

The next regular Eurogroup meeting is on 11 May just a day before the IMF requires a €750 million loan repayment.

On Monday, ECB Vice President Vitor Constancio said that a Greek exit was not an option and that a default by a euro zone state would have no automatic impact for its banks.

“We are convinced at the European Central Bank that there will be no Greek exit. The Treaty does not foresee that a country can be formally, legally expelled from the euro. We think it should not happen,” Constancio told lawmakers.


On 20 March, the European Commission offered Greece funds to deal with what it called a humanitarian crisis, after Prime Minister Alexis Tsipras vowed to clarify bailout reform pledges demanded by creditors.

Following crisis talks between Tsipras and European leaders, EU Commission chief Jean-Claude Juncker said he was making available €2.0 billion in unused EU structural funds to Greece.

>> Read: Greece promises to deliver full reform list after three-hour 'mini summit'

Greece secured a four-month extension of its financial rescue on 24 February, when its eurozone partners approved an economic reform plan that backed down on key measures and promised that spending to alleviate social distress would not derail its budget.

>> Read: Eurozone approves Greek reform plan with reservations

Germany's rejection of an initial Greek request for a six-month loan extension forced Athens into a string of politically sensitive concessions, postponing or backing away from campaign promises to reverse austerity, scrap the bailout and end cooperation with the Troika of EU, ECB and IMF inspectors, which are now called "the institutions".

>> Read: Greece, eurozone agree to four-month loan extension, avert crunch