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Greek government takes desperate measures in battle to stay afloat Greek government takes desperate measures in battle to stay afloat
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The Greek government is resorting to increasingly desperate measures to keep afloat amid dire warnings the debt-stricken country could go bust within weeks.The Greek government is resorting to increasingly desperate measures to keep afloat amid dire warnings the debt-stricken country could go bust within weeks.
In a balancing act not seen by any European administration in recent times, the cash-strapped coalition has sequestered the reserves of public bodies, seized EU subsidies destined for farmers and postponed all payments for state supplies in the scramble to continue servicing its debt and paying salaries and pensions. Pension funds have been raided to raise money for Treasury bill auctions.In a balancing act not seen by any European administration in recent times, the cash-strapped coalition has sequestered the reserves of public bodies, seized EU subsidies destined for farmers and postponed all payments for state supplies in the scramble to continue servicing its debt and paying salaries and pensions. Pension funds have been raided to raise money for Treasury bill auctions.
“It is clear we are reaching the end and very soon won’t be able to pay,” former finance minister, Stefanos Manos, told the Guardian. “They are scraping the bottom of the barrel for everything they can find.”“It is clear we are reaching the end and very soon won’t be able to pay,” former finance minister, Stefanos Manos, told the Guardian. “They are scraping the bottom of the barrel for everything they can find.”
To cover the credit crunch, corporations in which the state has a majority stake, including the Athens Metro, have been tapped. The scheme of repo transactions – where government bonds are used for short-term borrowing requirements – is believed to have raised upwards of €600m in recent weeks. Earlier this month the leftist-led coalition suspended some €300m of EU subsidies for farmers to help pay €1.7bn in public sector wages and pensions due next week. Greek subsidiaries of multinationals have also been approached for loans. To cover the credit crunch, corporations in which the state has a majority stake, including the Athens Metro, have been tapped. The scheme of repo transactions – where government bonds are used for short-term borrowing requirements – is believed to have raised upwards of €600m (£442m) in recent weeks. Earlier this month the leftist-led coalition suspended some €300m of EU subsidies for farmers to help pay €1.7bn in public sector wages and pensions due next week. Greek subsidiaries of multinationals have also been approached for loans.
The last-resort measures came as Deutsche Bank warned that Athens was at risk of being pushed into default on 9 April when it must meet a €450m debt repayment to the International Monetary Fund. The precarious state of Athens’ finances has been exacerbated by a precipitous decline in tax revenues – more than €1bn below target since January – said the bank’s economists.The last-resort measures came as Deutsche Bank warned that Athens was at risk of being pushed into default on 9 April when it must meet a €450m debt repayment to the International Monetary Fund. The precarious state of Athens’ finances has been exacerbated by a precipitous decline in tax revenues – more than €1bn below target since January – said the bank’s economists.
Deposit flight has also ratcheted up the pressure. More than €20bn has fled the country since the beginning of the year as savers rush to withdraw funds, worried about Greece’s ability to remain in the euro. “The risk of capital controls continues to rise,” noted the Deutsche report.Deposit flight has also ratcheted up the pressure. More than €20bn has fled the country since the beginning of the year as savers rush to withdraw funds, worried about Greece’s ability to remain in the euro. “The risk of capital controls continues to rise,” noted the Deutsche report.
In what was interpreted as a sign of growing concern over the outflows, the European Central Bank – among the bodies that have bailed out the Greek economy to the tune of €240bn – agreed on Wednesday to raise emergency liquidity for local banks by €1bn to €71bn.In what was interpreted as a sign of growing concern over the outflows, the European Central Bank – among the bodies that have bailed out the Greek economy to the tune of €240bn – agreed on Wednesday to raise emergency liquidity for local banks by €1bn to €71bn.
As the government marked national Independence Day with celebrations that included a fly-past of fighter jets and tanks rumbling through the capital, hopes of easing the credit squeeze with a €1.2bn injection of cash from the EU were quashed. Athens’ argument that it had mistakenly returned the money to the EU’s rescue fund, from the country’s bank recapitalization fund, was rejected by Brussels.As the government marked national Independence Day with celebrations that included a fly-past of fighter jets and tanks rumbling through the capital, hopes of easing the credit squeeze with a €1.2bn injection of cash from the EU were quashed. Athens’ argument that it had mistakenly returned the money to the EU’s rescue fund, from the country’s bank recapitalization fund, was rejected by Brussels.
This week the ECB raised the pressure further by formally restricting Greek banks from buying government debt.This week the ECB raised the pressure further by formally restricting Greek banks from buying government debt.
The move makes agreement over reforms with international creditors ever more urgent and prime minister Alexis Tsipras has been given until Monday to draft measures that will convince peers he is determined to overhaul the economy. Lenders have promised to unlock a €7.2bn aid disbursement if progress is made.The move makes agreement over reforms with international creditors ever more urgent and prime minister Alexis Tsipras has been given until Monday to draft measures that will convince peers he is determined to overhaul the economy. Lenders have promised to unlock a €7.2bn aid disbursement if progress is made.
In the two months since the anti-austerity government assumed power, relations with creditors – and especially Europe’s paymaster Germany – have worsened dramatically amid the administration’s brinkmanship over reforms.In the two months since the anti-austerity government assumed power, relations with creditors – and especially Europe’s paymaster Germany – have worsened dramatically amid the administration’s brinkmanship over reforms.
Talks between Tsipras and the German chancellor Angela Merkel in Berlin on Monday helped soothe tensions, but the young Greek premier was told in no uncertain terms that his country’s fate now lies in his administration’s ability to devise persuasive structural changes. “They urgently need to present a coherent list of reforms and I am worried because they constantly seem to be backtracking,” said Manos, finance minister under a former conservative government. “Such a plan will definitely entail taking decisions that will displease some voters. The government has ruled out taking recessionary measures but such reforms will naturally be grossly recessionary. Tsipras simply has to explain the reality to Greeks.” Talks between Tsipras and the German chancellor, Angela Merkel, in Berlin on Monday helped soothe tensions, but the young Greek premier was told in no uncertain terms that his country’s fate now lies in his administration’s ability to devise persuasive structural changes.
“They urgently need to present a coherent list of reforms and I am worried because they constantly seem to be backtracking,” said Manos, finance minister under a former conservative government. “Such a plan will definitely entail taking decisions that will displease some voters. The government has ruled out taking recessionary measures but such reforms will naturally be grossly recessionary. Tsipras simply has to explain the reality to Greeks.”
Athens has come under fire for its treatment of technical teams dispatched by the EU and IMF to examine the government’s books. With money running out fast officials said it was expedient that now, more than ever, auditors were given free rein. The teams have been forced to meet in hotels out of view of Greeks who have accused monitors in the past of behaving like colonial overlords.Athens has come under fire for its treatment of technical teams dispatched by the EU and IMF to examine the government’s books. With money running out fast officials said it was expedient that now, more than ever, auditors were given free rein. The teams have been forced to meet in hotels out of view of Greeks who have accused monitors in the past of behaving like colonial overlords.
“They haven’t been allowed into the general accountancy office and ministries,” said Jens Bastian, an Athens-based economics analyst and former member of the European Commission task force for Greece. “There’s been a certain lack of professionalism in the way they have been treated, one could call it rather confrontational,” he added. “They haven’t been allowed into the general accountancy office and ministries,” said Jens Bastian, an Athens-based economics analyst and former member of the European commission task force for Greece. “There’s been a certain lack of professionalism in the way they have been treated, one could call it rather confrontational,” he added.