Bonds maturing in May to create funding gap

The Greek streamlining program is facing the threat of a funding gap and the Finance Ministry is examining the option of an extraordinary issue of treasury bills to cover part of the Greek bonds which are set to expire next month.

May 20 is the maturity date of bonds totaling 5.6 billion euros. While 4 billion euros of that amount is in the portfolio of the European Central Bank, the rest (1.6 billion euros) is in the portfolios of the national central banks of the eurozone. The latter bought the Greek bonds before the outbreak of the crisis and, according to a Eurogroup decision last December, they were to examine the possibility of postponing the maturity date of those holdings, known as ANFA.

Nevertheless, sources say that none of the eurozone’s national central banks has opted to do so, meaning that Greece will have to pay out next month, despite the existence of a provision in the country’s funding program that this amount would not be paid. This generates a funding gap that will have to be covered in some way so as not to create fresh problems with the Greek debt figures.

Ministry officials say that the government and the country’s international creditors have approved the issue of an extraordinary set of T-bills up to May 14. The reason for this is because the executive council of the International Monetary Fund is expected to convene after May 20 to approve the disbursement of its next bailout tranche to Greece, amounting to 1.8 billion euros.

No decision has been made yet, but the solution of an extra T-bill issue is gaining ground as the clock keeps ticking. Strengthening the likelihood is the fact that that is exactly what happened last year in a similar situation.

Alternatively, any such hole could be plugged by a front-heavy disbursement of bailout installments by the eurozone. For this reason, the Greek side is pushing for the approval of the second quarter’s 3.2-billion-euro tranche by eurozone finance ministers at the May 13 Eurogroup meeting – before the creditors’ representatives complete their inspection on the course of the bailout agreement’s implementation. That cannot be ruled out but it is not very likely.

Equally unlikely – though not impossible – is the disbursement of the 2.8-billion-euro March installment this Monday, when the Euro Working Group of eurozone finance ministry officials convenes. If the Greek Finance Ministry’s multi-bill is passed by tomorrow night, the EWG might give the green light for the immediate release of the 2.8 billion euros. However, ministry officials say that the most likely scenario is for the disbursement of the tranches of 2.8 billion and 4.2 billion euros (the latter being the eurozone’s share in the first-quarter installment) to be approved by the May 13 Eurogroup meeting.

Besides the ANFA issue, the ministry is also concerned about the delays in the privatizations program. The revenues from sell-offs could be used for the servicing of the country’s debt, but on a cash basis they are also used for the coverage of day-to-day needs.

According to the state budget, in the period from January to May 2013, the state coffers should have earned 272 million euros from privatizations. Instead their revenues from this source were less than 50 million euros in the year’s first four months.

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