Wednesday 26 October 2016

Greece crisis: Sceptical mayors refuse to lend to near-bankrupt state

Published 13/05/2015 | 08:04

Greek Finance Minister Yanis Varoufakis arrives at his ministry in Athens yesterday, while tax officers demonstrate over pay issues in their sector
Greek Finance Minister Yanis Varoufakis arrives at his ministry in Athens yesterday, while tax officers demonstrate over pay issues in their sector

Greek mayor Apostolos Kimisis is refusing to hand over local funds to the near-bankrupt state, saying he needs the money to fix roads and maintain the water supply in his small municipality. He is just one of hundreds.

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So far, only two out of 325 mayors across Greece have obeyed a central government decree ordering public entities to lend it their spare cash, the head of the municipalities' union said.

Their reluctance reflects doubts about whether the money will ever come back, just as euro zone governments are refusing to disburse more aid to Athens unless it shows its commitment to implementing unpopular economic reforms.

Kimisis says he fears the decree from Athens will starve his administration based in the western coastal town of Amfilochia of funds for its day-to-day needs.

"I'm standing outside and it's about to rain. If that sets off a rockfall in the mountains, how will we repair the roads?" he said from Amfilochia, part of a broader municipality of the same name in a farming and stockbreeding region.

"We've got a heap of projects, a heap of obligations," he said, listing a series of needs: maintaining irrigation and power supplies during the summer season plus buying spare parts for municipal vehicles and machines to repair rural roads.

Greece has not received any aid under its bailout programme with the European Union and IMF since August. Shut out of borrowing on bond markets, it is running out of cash. Athens averted the imminent risk of default by making a repayment to the IMF on Monday, but Finance Minister Yanis Varoufakis has warned that its liquidity situation is "terribly urgent".

The decree to local administrations and other state entities has so far collected only about 600 million euros (£430.1 million), the government said on Tuesday. It had initially hoped to raise 2.5 billion euros from the measure.

"Every mayor must take responsibility during this crucial time for the country," government spokesman Gabriel Sakellaridis said on Monday. He attacked their refusal to hand over cash as hampering the government's efforts.


Regional governors, who had originally opposed the order, agreed last month to lend to the central government after Prime Minister Alexis Tsipras assured them the measure would last for a specific period only.

But KEDE, the union representing Greek municipalities, announced over the weekend that it would not hand over any reserves unless the government said publicly that the money would "help to save Greece".

It, too, wants assurances that the measure is temporary, the money is safe, local administrations will not lose their historic autonomy and that reserves marked for specific, contracted projects would be exempted.

"If the government says 'we need this money to pay wages and pensions, otherwise we'll go bankrupt', only then will we give it," said KEDE president George Patoulis.

Even then, Patoulis - who also runs Marousi municipality in northeastern Athens - is sceptical about whether that money could solve the national liquidity crisis as the government tries to negotiate a resumption of the aid.

"If Athens reaches an agreement with its lenders then it won't need the municipalities' money. If it doesn't reach an agreement, I doubt 300 million euros will save the country," he said. "Let's be clear: local administration is not to blame for the country's state, but those at the top are, and they should take responsibility."

The decree excludes pension funds and some state-owned firms. Reserves needed for immediate payments are also exempt, but Patoulis wants assurances that money to cover daily expenses such as maintenance of schools and generally keeping towns running will also be excluded.

Under the decree, money that a public body does not need immediately must be deposited at the Bank of Greece. Then the funds should be lent to the state debt agency for one to 15 days against collateral and repaid with interest at expiry. Loans can also be rolled over.

In Amfilochia, Kimisis said he feared a chain reaction in the local economy once suppliers realised towns and villages had no money to pay bills. "The decision is foolish. It's going to blow smaller municipalities in the air," he said.


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