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Saturday 22 October 2016

Greece makes IMF payment, gets bank funds, but doubts remain

Published 10/04/2015 | 11:39

Greece's new Prime Minister Alexis Tsipras (L) meeting with the President of Cyprus Green Party, Giorgos Perdikis on February 2, 2015 in the capital Nicosia.
Greece's new Prime Minister Alexis Tsipras (L) meeting with the President of Cyprus Green Party, Giorgos Perdikis on February 2, 2015 in the capital Nicosia.

Greece has made a crucial payment to the International Monetary Fund and won extra emergency lending for its banks but it remained unclear whether Athens can satisfy skeptical creditors on economic reforms before it runs out of money.

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Euro zone partners gave Greece six working days to improve a package of proposed reforms in time for finance ministers of the currency bloc to consider whether to release more funds to keep the country afloat when they meet on April 24.

After weeks of contradictory statements, Finance Minister Yanis Varoufakis announced that Athens was resuming the sale of state assets halted when a leftist-led government was elected in January, but would do so on different terms.

"We are restarting the privatization process as a program making rational use of existing public assets," Varoufakis told a conference in Paris. "What we are saying is the Greek state does not have the capacity to develop public assets."

He did not specify which tenders would go ahead and said the government wanted public-private joint ventures with a minimum investment commitment required from bidders, and the state retaining a stake to generate pension funds.

A government official confirmed Greece had transferred the 450 million euro ($485 million) loan repayment to the IMF, reassuring financial markets after earlier doubts about whether it had money to redeem the debt and pay wages and pensions.

EU officials said the Greek delegate made an urgent plea for cash at a meeting of deputy finance ministers in Brussels on Wednesday evening but was told there must first be progress on a stalled list of measures to make public finances sustainable.

"From the Greek side there was a strong statement that liquidity is getting really bad and there was an appeal to release some type of liquidity support before the euro zone finance ministers' meeting on April 24," a euro zone aide said.

"But no one knows how this could be done -- there is no willingness to provide support before there is some progress in terms of the reform program," the official said.

In a small short-term boost, the European Central Bank agreed to increase the ceiling on emergency lending assistance to Greek banks by 1.2 billion euros to 73.2 billion euros, a banking source told Reuters. The ECB is reviewing the limit weekly while euro zone negotiations continue.

Leftist Prime Minister Alexis Tsipras, elected on a promise to end austerity, is balking at politically sensitive reforms of the pension system and labor markets to which his conservative predecessor had agreed. EU sources said Brussels was pushing Athens towards more rapidly applicable measures to liberalize product and service markets instead.

Greece's creditors -- the euro zone and the IMF -- are using the leverage provided by its acute cash predicament to press for those measures to be implemented.


A European Commission spokesman stressed the importance for Greece of the finance ministers' session in Riga, telling reporters: "Obviously, everything that happens before April 24 in terms of reaching an agreement will be greatly welcome."

Athens submitted a 26-page list of planned reforms last week but euro zone officials said they lacked key details and proper assessments of the financial implications.

The officials said trust was so low that ministers would want to see legislation going through the Greek parliament, not just promises, before they released more funds.

Varoufakis accused the euro zone of inflicting toxic medicine on his country, and starving it of cash.

"Tragically we find ourselves today in a similar situation," he told an economic conference. "As a finance minister ... in order to create the liquidity which is necessary to see these negotiations through hopefully to a sustainable solution, I have to make the same request that we are allowed to issue T-bills over and above a certain limit to create the liquidity necessary to see us through to the end of the month or the next month or June, so as to be able to redeem payments to the former troika -- to the IMF in this case."

A secret memorandum drafted by the finance ministry of Finland, one of the most hardline creditor countries, raised the prospect of Greece effectively being pushed out of the euro zone if fails to meet obligations under its 240 billion euro bailout program.

The newspaper Helsingin Sanomat quoted the memo, dated March 27, as saying Helsinki must be prepared for the possibility that Greece would run out of cash before the end of June.

That could lead to a situation where "by silent approval of the other euro zone countries a process is started which in effect results in Greece being expelled from the euro", it said. The finance ministry was not available for comment.

On the second day of a visit to Russia, Tsipras said in a speech at Moscow University that Russia could not be an alternative "solution" for Greece's debt problems to negotiations with the euro zone.

But he called on the European Union to restore dialogue with Moscow despite differences over Russia's role in Ukraine.

"It is impossible to build European security without Russia, let alone against it," Tsipras told students. "In this context, we must ... restart the EU-Russia dialogue in order to address global challenges, energy cooperation and to promote mobility among citizens."


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