Government takes state bodies’ cash reserves to meet needs

With pressure growing on state coffers as cash reserves run low without any immediate prospect for the release of rescue loans, the government on Monday signed a legal degree obliging state bodies, with the exception of pension funds, to transfer their reserves to the Bank of Greece for the state’s use.

The move, issued in the form of a presidential decree which does not require a parliamentary vote, indicated that the government is close to running out of cash. It dictates that all state bodies, ranging from hospitals to local authorities, must move their cash reserves to the central bank, but noted that pension funds were strictly exempt from the obligation. Regional authorities were said to be planning legal action against the decree. The move is expected to tap around 1.2 billion euros, meaning that the government will likely be able to pay civil servants’ salaries and pensions this month.

But the initiative will not solve Greece’s financial problem, which will rear its head again in May when the country must make further repayments to the International Monetary Fund, one of its three creditors.

The government is hoping that a Eurogroup summit due on May 11 will lead to the release of 1.9 billion euros in profits from Greek bonds held by the Eurosystem on the secondary market. European officials have already indicated that a eurozone summit due to take place this Friday in Riga, Latvia, will be no more than an opportunity to take stock of progress in negotiations between Greece and its creditors which have been moving slowly. The talks, which had been taking place in Brussels, have been based in Paris over the past few days.

Government sources have sought to appear upbeat on the prospects of a deal. But European officials appear frustrated at the slow progress. There were reports of some convergence as regards privatizations though no details were forthcoming on which assets talks were focusing on. And the two sides remained far apart on the contentious issues of labor market and pension reform.

It is likely that progress will be discussed in a Euro Working Group expected to take place Wednesday ahead of Friday’s Eurogroup summit. European Economic and Monetary Affairs Commissioner Pierre Moscovici insisted Monday that the clock was ticking for Greece. “There is no time to lose,” he said, expressing concern about intensified speculation of a potential Greek exit from the eurozone.

In Athens, some government officials continued to discuss the prospect of early elections or a referendum in the event of talks with creditors collapsing while others ruled it out.

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