Greece’s cash-strapped government may get a brief respite in yet another looming debt payment next week thanks to a public holiday.
As Prime Minister Alexis Tsipras’s government struggles to pay pensions and salaries at the end of the month, the May 1st public holiday may give its depleted coffers a break.
Greece needs to repay about 201 million euros ($217 million) in interest due on its International Monetary Fund loans by then, according to the IMF’s website. As the deadline coincides with a holiday, followed by a weekend, the payment can be delayed until May 6, a person familiar with the matter said.
The Fund will only send the payment notification on May 4, and Greece will have two days to make the payment, the person said. The deadline for a principal repayment of about 766 million euros, which is due May 12, won’t change, the person said, asking not to be named, as he was not authorized to speak publicly on the matter.
Interest on IMF loans is calculated and paid quarterly, using the three-month periods corresponding to the IMF fiscal year of May 1 to April 30. A Greek official with direct knowledge of the matter confirmed that the payment is due May 6, saying that interest charges on IMF loans are being paid 4 working days after the end of the month charged. May starts with three non-working days.
Greece has lost access to capital markets and relies on emergency loans from the IMF and the euro area to stay afloat. As a review of its compliance with bailout terms remains stalled for the eighth consecutive month, the country is running out of time and money. Its liquidity position is so tight, that a missed payment on its international obligations may be a matter of weeks, according to economists surveyed by Bloomberg.
Internal obligations, including payments to civil servants and retirees, are also becoming increasingly difficult. Greek deputy Finance Minister Dimitris Mardas said Wednesday that the country’s coffers are about 400 million euros short of the amount needed for meeting salaries and pension obligations. The finance ministry has so far secured 160 million euros from local authorities, hospitals, universities and municipalities, after the government ordered them to hand over cash reserves to Bank of Greece, Mardas said today.
The move can buy the government up to six weeks of liquidity, a person familiar with the matter said earlier this week, while negotiations with creditors continue.
Greek bonds fell as yields on three-year notes rose 100 basis points to 25.9 percent as of 3 p.m. London time. The Athens Stock Exchange General Index rose 3.3 percent to 760.52.
If talks over the disbursement of bailout funds reach a dead end, the government would consider the options of snap elections or a referendum, according to Greece’s deputy Prime Minister, Yannis Dragasakis. These alternatives are “at the back of our mind, as options to seek a solution, in case of deadlock” Dragasakis was cited as saying in an interview with To Vima newspaper, on April 19.
A referendum on measures requested by creditors and euro membership looks to be the most likely way out of current impasse with a probability of 55%, Dimitris Drakopoulos and Lefteris Farmakis, analysts at Nomura International PLC, said.
If Greece were to act on one of these options, time is running short. The constitution dictates a minimum of three weeks after an election is called for the ballot to be held. This would mean that Tsipras would have to decide on this option by next week, or risk the country running out cash in the middle of the campaign trail.
“There are still wide differences to bridge and to build on substance,” Eurogroup head Jeroen Dijsselbloem said after a meeting of euro area’s finance ministers in Riga, Latvia, today.