Tuesday, 17 March 2015

A financial snapshot of Greece

Under the terms of a February 20 agreement with creditors, Greece is being asked to pay its own way through March and April, while 7.2bn euros in loan instalments are withheld until May. Without financial assistance, Greece could default, even if by accident.

These are the upcoming payment deadlines to keep on the calendar: 

20 March - 336mn euros to IMF and 1.6bn euros in short-term bonds to private lenders
9 April - 448mn euros to IMF
14 April - 1.4bn in short-term bonds to private lenders
17 April - 1bn in short-term bonds to private lenders

The government has said it will prioritise IMF payments, but it is thought to need at least 4bn euros to prevent a credit event with private lenders. It has asked pension funds to lend it an estimated 2.5bn euros in their accounts, but they have so far refused.

One possible source of money is to allow the government to issue short-term bonds. The European Central Bank refused this last month, because the only people buying Greek debt right now are Greek banks, who are doing it on money borrowed from the ECB. A bond issue would therefore be a back-door ECB loan.

Another possible source of money would be giving the Greeks the 1.9bn euro profit the ECB made in 2012 by buying Greek bonds at low rates from other lenders.

Even if all goes well and Greece gets the whole outstanding 7.2bn euros by May, it faces a funding shortfall of at least half a billion euros before the end of the year.

Three measures may help address that; the first is a tax bill coming to discussion in parliament in the next few days, which is expected to encourage large down payments from taxpayers in arrears. The second is an initiative to collect 2.5bn euros from wealthy taxpayers who seem to have mis-declared their income. The third is an initiative to redirect the proceeds of the Asset Development Fund, which oversees privatisations, to social security and away from overseas creditors. Such a move is likely to annoy the latter, but might finally guarantee the solvency of the former.

Greeks are just as worried as their creditors during this hiatus between the Feb. 20 agreement and legislation backing it up. The Athens stock market continues to fall, and some 20bn euros lifted from bank deposits before and since the election have not returned.

It seems, however, that more and more analysts are concluding that Greece's career in the Eurozone is over, and its exit will ultimately be no accident. Check out: 



Andreas Koutras:

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