T-bill issues are depriving the real economy of vital liquidity

The state has absorbed liquidity of 11 billion euros through the issue of treasury bills, and there is concern in the market that this amount may well grow further in the coming months so that the state can safeguard its cash reserves.

The Finance Ministry has issued T-bills adding up to 15 billion euros, which are mostly to be found in the portfolios of local banks. According to the country’s agreement with its creditors, out of the 15 billion euros of the T-bills, banks can use no more than 3.5 billion as collateral to draw liquidity from the European Central Bank, which they have already done. Therefore some 11 billion that the credit system could have used to finance the economy has been absorbed by the state.

The chances that Greece will fail to complete the agreement with its creditors in time to result in the disbursement of 7.2 billion euros are leading the Finance Ministry to extraordinary T-bill issues, even within January, further reducing the cash flow in the real economy.

This situation forced Minister Gikas Hardouvelis to issue a public warning about the future if the creditors’ inspection is not completed in time. “The funding needs of the country are known. For the next three months there is a need for the payment of about 4.5 billion euros in total,” the minister said on Monday, adding that “there is also the further requirement for the coverage of T-bills maturing in that period. That need is expected to be covered mostly by foreign funds and other investors if an agreement [with the creditors] is reached.”

Otherwise, Hardouvelis warned, “the domestic banking system will have to be used, which will limit the capacity for the funding of private economy.”