Tuesday 21 November 2017

Greece scrapes bottom of barrel to pay civil servants their wages

Greece’s prime minister, Alexis Tsipras, says he is optimistic
Greece’s prime minister, Alexis Tsipras, says he is optimistic

Alkis Konstantinidis

Greece will need to tap all the remaining cash reserves across its public sector, a total of €2bn, to pay civil service wages and pensions at the end of the month, according to finance ministry officials.

Barring a last-ditch deal with its creditors, that would leave no money to repay the International Monetary Fund almost €1bn due in the first half of May. Athens' scramble for basic funds shows how extreme the financial constraints on Greek Prime Minister Alexis Tsipras have become as he tries to convince sceptical foreign creditors to extend his country new financial aid.

Officials from Greece and the lenders are meeting in Brussels on Saturday for a new round of negotiations ahead of a key euro zone finance ministers' meeting in Riga on Friday.

"This is the last bit of cash that the Greek state has," a senior finance ministry official, who requested anonymity, told Reuters.

Euro zone officials have voiced scepticism about previous Greek warnings of empty coffers, although even they acknowledge a crunch is nearing.

For months, the government has been borrowing from different parts of the state administration, including the Athens subway system, to pay the wages and pensions of public sector workers. Now, however, it is reaching the end of the line.

Finance ministry officials say the state's cash balance will be negative from April 20 if the government does not extract the €2bn in cash deposits remaining in various public bodies, including a handful of pension funds and regional administrations.

Without that money, the state would be €1.6bn short of what it needs to pay month-end salaries and wages.

Regular tax revenues, which start flowing in early in the month, should help the state's financial position of course. Tax revenues had begun to slip early in the year, when Mr Tsipras' government was elected, but have stabilised since to around €4bn a month.

Still, the financial pressure will not subside because Athens faces a new round of payments to the IMF next month. It needs to give €950m to the IMF by May 12 and then domestic commitments kick in once again.

Mr Tsipras is hopeful he can convince Greece's creditors to unlock the funds Athens needs to prevent default and a possible exit from Europe's single currency. To do that, he needs to present detailed plans to reform the economy, including the labour market and pensions system. International creditors have so far deemed Athens' offerings inadequate.

But the leftist prime minister is also keen to keep far-left factions of his party at bay by sticking to a hardline stance on rolling back years of austerity that has impoverished Greece. Mr Tsipras said on Thursday he was optimistic for a deal. But he also said that there was still discord on four key points - including the key issues of labour and pensions.

Without a political agreement with the eurozone next week, Athens is likely to have to choose between making wages and pension payments to its people or reimbursing the IMF.

"Our aim is to be able to fulfill our obligations", Deputy Finance Minister Dimitris Mardas said when asked whether Athens could pay wages and salaries in April and make IMF payments in May. "I don't want to say that we are comfortable (on wages and pensions) but nor do I want to spread panic."

Athens tapped €555m of commissions paid by Greek banks into the Hellenic Financial Stability Fund last month.


Irish Independent

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