Gov’t prepared to tap BoG cash reserves again if necessary

Gov’t prepared to tap BoG cash reserves again if necessary

The government, the country’s creditors and the local market are increasingly concerned as to how long Greece’s cash reserves will suffice before the country defaults. As long as there is no agreement on the country’s first review of its third bailout program, the 5.7 billion euros scheduled for disbursement to Athens at the start of the year will be delayed further.

While on previous occasions it was pressure from the creditors on the government to backtrack from its “red lines” that delayed the review’s progress, this time it is the disagreement between the eurozone and the International Monetary Fund that has seen the monitoring being put off.

In this context, government officials say the state is capable of meeting its obligations until the end of May or even June. However, it will impossible for the state coffers to cover the bond maturing in July, when Greece must hand over some 2.8 billion euros the European Central Bank.

Before then, Athens must also cover debts of 3.8 billion euros to its creditors in the period from March to June, with Finance Ministry officials saying this is possible, although the public coffers do not necessarily have the funds required for that – this means that there are ways for the state to find the money that will prevent it from going bankrupt by June without the tranche from the bailout program. This serves to answer reports in foreign media according to which Greece will not able to handle its cash requirements.

In fact, if Greece does not collect any more tranches from the third bailout program this spring, the cost for the real economy will be heavy again, following a similar ordeal last year: The state’s expired debts will grow considerably and the government will need to resort to using all kinds of cash reserves available at the Bank of Greece. The same kind of solutions were employed last year, when Yannis Varoufakis was at the helm of the Finance Ministry, and the real economy is set for another blow in terms of liquidity.

The aim is for the country to avoid bankruptcy and for the government to obtain some more time in its bid to achieve a better outcome in its protracted negotiations with Greece’s creditors.

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