ECONOMY

Athens must cover funding gap of 4.6 bln euros in 2014

Greece and the eurozone have three months to come up with a way to bridge the country’s funding gap of 4.6 billion euros, the International Monetary Fund warned in a report published earlier this week. Otherwise, the IMF added, it will not be able to continue supporting the Greek bailout program as there will be no secured funding for the next 12 months.

According to sources, eurozone agencies and officials in Athens have already started examining ways in which the estimated funding gap for 2014 could be covered. One concerns the issue of Greek state bonds.

Finance Ministry officials believe that Greece could go ahead with a small issue of bonds in the summer of 2014, although it is highly likely that such an option would not satisfy the IMF given that it does not offer the immediate solution the Washington-based fund is asking for.

As the IMF explained in its report, from June 2014 a funding gap will be created amounting to 4.6 billion euros for the whole of the year. Unless a way is found to cover it before the next inspection visit by the representatives of the country’s creditors – at end-July or end-August – the country’s funding will not be secured for the following 12 months and the Fund will not be able to continue supporting the Greek program according to what its charter provides for.

The Euro Working Group of eurozone finance ministry officials will examine the matter in its next meeting on June 13, as the IMF is exerting huge pressure regarding this problem.

Notably, the funding gap issue will not disappear next year, as the IMF report suggests there will be another gap in 2015 amounting to 6.5 billion euros. That means the total gap in the 2014-15 period will reach an estimated 11.1 billion euros.

The funding gap is also the reason why the Fund insists there is no room for easing fiscal measures such as reducing value-added tax in food service. It stresses that any easing would mean the fiscal targets will not be met.