Bloomberg: Liquidity in Greece Might End in Three Weeks



Pedestrians walk past the bank of Greece in AthenAs negotiations over the Greek debt continue for over six months, the impasse threatens to drag Greece back into recession, or even lead it to bankruptcy, according to a Bloomberg report.

Greece needs 6.5 billion euros by the end of the month to pay its debt obligations. However, its budget forecasts a 2.1-billion-euro cash deficit in March, Bloomberg calculated. In January, there was an unexpected 217-million-euro shortfall in tax revenue alone.

As a result, the new government is forced to seek emergency loans from European partners and the International Monetary Fund (IMF). If Athens fails to secure an agreement with them, it will face a serious liquidity problem and economic recovery might end up being a faraway dream.

“To Potami” party MP and former general secretary of public revenue Haris Theoharis spoke to Bloomberg on Wednesday, saying that the ongoing negotiations have affected the Greek economy. “Every investment has been put on hold, pending the result of the talks,” he said.

However, Finance Minister Yanis Varoufakis is optimistic, claiming that the country has an alternative plan to deal with the shortfall but did not specify what it is.

According to Bloomberg, investors are optimistic too that a solution will be found. Yields on 10-year Greek bonds fell 2 basis points to 9.62% at 12:48pm in Athens on Thursday. Greek stocks remained at about the same, falling 0.1%.

Two officials involved in the 240-billion-euro bailout said Greece could potentially use its available reserves to make it past the end of this month. A third official said Greek obligations, including debt repayments to the IMF, are only safely covered for another two weeks. The officials asked to remain anonymous while negotiations continue.

According to the report, Greece’s government has so far been covering its cash deficit by drawing from the reserves of public entities, including pension funds, hospitals and universities. It also rolls over treasury bills, forcing Greek banks to make a choice between participating in liquidity-draining auctions or letting their sovereign default.

Greece’s biggest pension fund, IKA, said in a Wednesday statement that repurchase agreements with the government are common.

“When short of cash, governments increase their arrears, delay tax rebates and hold public investment payments,” said Athens University of Economics and Business professor Panos Tsakloglou. If that continues, it could dampen economic growth, he added.

Greece is strapped for cash but creditors warn that no bailout disbursements will be made unless the new government implements crucial economic reforms. “Before any money flows, we need to check whether Athens meets the agreed terms,” German Finance Minister Wolfgang Schaeuble told Stuttgarter Zeitung on Wednesday.

Greek banks’ issuing of treasury bills has already reached the limit acceptable of regulators. That means creditors will not be able to bail out the government with more short-term notes unless the European Central Bank (ECB) allows them.

The clock is ticking for Europe’s most-indebted state, said Bloomberg. Greece needs to refinance treasury bills totaling 1.6 billion euros next week and pay about 420 million euros in IMF amortization and interest. The bill rises to 3 billion euros the week after, of which 913 million euros are due to the IMF.