Greek Finance Minister Yanis Varoufakis said he’s counting on the European Central Bank to help the country avert default when it runs out of money next month, while bank deposits are also starting to flow back.
The ECB owes Greece almost 2 billion euros ($2.3 billion) from the return of profits from its program of buying euro- region bonds to support the market, Varoufakis said in an interview with Bloomberg Television in Athens. The government must make a payment to the International Monetary Fund in March.
“So it could hand over this money to the IMF as partial repayment,” he said on Wednesday. “I’m giving you examples, nothing has been decided. This is money we are owed. This is our money, an overpayment to the ECB.”
ECB President Mario Draghi told the European Parliament on Wednesday it’s a popular misconception that it’s up to his institution to return any profit from the Securities Markets Program. He said governments are in control of the funds.
“You still believe that the SMP profits are owned by the ECB and are kept there? That’s not so,” he said. “The SMP profit, like any other profit, has been distributed to all the central-bank members of the ECB. And the central-bank members of the ECB have transferred their profits to their national budgets.”
Euro-area governments agreed in November 2012 to transfer to Greece an amount equal to any profit on SMP holdings of the country’s debt as long as it complies with the conditions of its surveillance program.
The region’s finance ministers on Tuesday approved a package of Greek reforms, which include improved tax collection and tackling corruption, following a recommendation from creditor institutions. On the same day, about 700 million euros returned to Greek bank accounts, Varoufakis said.
There were more than 20 billion euros of withdrawals since early December, according to estimates.
“There was a deposit flight back into the Greek banking sector,” said Varoufakis, 53. “It’s a question of direction. Once you turn the tide, you hope.”
Creditor institutions — the European Commission, ECB and IMF — warned that the package of reforms were just a starting point, and that Greece needs to stick with its commitments.
The measures, which also include maintaining state-asset sales, are a condition for extending the availability of bailout funds for another four months based on an initial agreement on Feb. 20. The current program, which has been keeping Europe’s most indebted state afloat since 2010, was scheduled to expire at the end of this month.
The next hurdle will come in April when the institutions and finance ministers review progress. That will come after the government has to service about 2.2 billion euros of debt, including repaying loans to the IMF. The figure doesn’t include rolling over Treasury bills.
“I’m pretty confident we won’t have a cash-flow problem, because we all struggled very hard through long hours of discussions with our partners, with institutions, to come to this stage,” Varoufakis said. “I find it very hard to imagine that Europe and the IMF will allow us to trip over what is a relatively small cash problem.”
Varoufakis, an economics professor at the University of Athens, spoke from his office on the sixth floor in the finance ministry, which lies opposite the Greek Parliament in Syntagma square, scene of demonstrations during the economic crisis. In the elections of Jan. 25, he got more votes than any other candidate in any Greek district.
He said that criticism of the Greek paperwork listing its commitments to change the economy was unfair.
The list of commitments was “not very specific” and doesn’t convey “clear assurances” that reforms will happen, IMF Managing Director Christine Lagarde wrote in a letter to the head of the euro region’s group of finance ministers.
“We were asked to produce a three-page document and we produced a five-page document over a weekend,” Varoufakis said. “Nobody ever expects in their right mind that can come complete with financial analysis, fiscal analysis, quantitative targets and monitoring and measuring and performance indicators.”
The ASE stock index rose almost 10 percent after the agreement with finance ministers, before declining 1.6 percent on Wednesday. Greek stocks opened lower today, with the benchmark index falling 1.9 percent at 12:06 p.m. Athens time. Yields on three-year bonds rose 13 basis points to 13.4 percent.
The 10-year bond was at 8.95 percent. When asked if that was the right price for Greek risk, Varoufakis said “probably.” For the moment, Greek debt is not visibly sustainable, he said.
“The moment there is an announcement of a sensible deal on investment, primary surpluses and debt restructuring, you will see that those yields will sink to 1 percent, in line with what’s going on in other European countries,” Varoufakis said.