Gov’t drafts contingency plan for bond payout

The Finance Ministry has been in a race against time for the last few days in a bid to complete all the prior actions required for the disbursement next week of the next bailout installment amounting to 4.2 billion euros.

The aim is for Minister Yannis Stournaras to go to the Eurogroup meeting of eurozone finance ministers on Monday with all the ministerial decisions and circulars implementing the clauses of the recent multi-bill ready. Still, in association with the country’s creditors, the ministry has drafted an alternative plan that would secure the smooth servicing of all the state’s obligations.

The ministry is worried that it might be accused at Monday’s meeting of not implementing the agreed measures, which could block the approval of the 4.2-billion-euro tranche and raise obstacles in the payment of the state bonds that mature on May 20.

Sources say that up to yesterday the ministry had overseen the completion of about 90 percent of the decisions required. In essence, the completion of another two or three decisions, concerning changes to the energy sector, was still pending.

The ministry has already completed the decisions regarding payment schemes for expired tax debts, new methods for cross-checking tax records, how value-added tax will be paid, and the autonomy and operation of the General Secretariat for Revenues. Ministry sources expect all prior actions to be completed by Monday so that there will be no problems at the Eurogroup, leading to the disbursement of the 4.2 billion euros and the start of talks for the approval of the following tranche of 3.3 billion euros.

If all goes well, Monday will see the start of discussions on terms and conditions, also known as milestones, for the payment of the 3.3 billion that concerns the second-quarter part of the bailout loans. This is due in the first half of June. These milestones are measures that Greece would have to implement anyway ahead of the visit by the creditors’ inspectors next month.

However, the government is also preparing for the negative scenario, in case the 4.2 billion euros is not released before May 17. If the government does receive that amount, when added to the existing cash of about 3.5 billion euros, it will allow the state to repay the bonds of 5.6 billion euros set to mature on May 20 and maintain the necessary liquidity.

The alternative plan concerns the extraordinary issue of treasury bills amounting to 3.8 billion euros that would safeguard the payout of the maturing bonds and the coverage of the state’s other needs until the next bailout funds from the support mechanism come in. This plan has been agreed with the country’s creditors for some time now as both sides recognized the clear danger of the decision for the payment of the next tranche coming too late for the bond payout.

The problem is that even if the release of the 4.2 billion euros is approved on Monday, there may not be enough time for the funds to arrive in Greece by Friday.

Notably, the extraordinary issue of T-bills worth 3.8 billion euros may well take place even if the installment of 4.2 billion euros is disbursed, but that would mean it will not be necessarily conducted next week. It could take place later, in anticipation also of the approval of the loan tranche of 1.8 billion euros from the International Monetary Fund, expected on May 31.