The Finance Ministry has issued a circular calling on all general government entities to transfer their cash reserves – currently sitting in bank accounts – to the country’s central bank, which has generated concerns among local authorities. Commercial lenders are also worried about the loss of deposits.
It is estimated that the total amount that should be transferred to the Bank of Greece by September 29, according to the circular by the General Secretary for Fiscal Policy Frangkiskos Koutentakis, is between 3 and 4 billion euros.
The transfer is compulsory per the law cited by the circular dated September 13, including a legislative act issued in April 2015 when the state coffers had emptied as a result of the negotiations led by then finance minister Yanis Varoufakis. The state had then appropriated entities’ reserves to meet its basic obligations. The transfer is also provided for by the revised bailout agreement.
The circular noted that June data from the Bank of Greece showed that a number of entities have not been keeping in line with the law, and are now asked to submit their reserves or face sanctions.
However, the Central Union of Greek Municipalities (KEDE) decided after an extraordinary board meeting on Wednesday against complying with the circular, upon the recommendation of KEDE head Giorgos Patoulis. At the meeting Patoulis argued that “the reactivation of the legislative act constitutes an institutional failure on the part of the government,” adding that the circumstances today are different to those in 2015.
Local authorities are obviously concerned about the safety of their reserves, despite the circular stressing that the cash “is fully secured and is available immediately or within a few days.” It also mentions the high returns that depositing the reserves at the central bank entails.
The country’s systemic banks fear they will lose deposits of some 3 billion euros, while local cooperative lenders are even more concerned as local authorities will have to withdraw deposits totaling some 400 million euros.