Greece running on fumes

As it heads into the latest round of negotiations with creditors on Friday, the Greek government is in increasingly desperate financial shape.

It has now drawn on most of the money it can find in the central state machinery. This includes freezing payments for public works since the election. Public contractors believe they are owed in the region of 1.5bn euros.

Alternate Finance Minister Dimitris Mardas on week launched a savings witch-hunt across the budget, targeting 40mn euros. 

The government’s latest move is to force public entities, including local government, to send their cash reserves to the central bank, where it can be used at a moment's notice to repay creditors. This will officially take the form of a loan, but no one knows for how long. A decree to that effect is expected to clear parliament on Friday. Mardas says he believes municipalities can scrape up some 2 - 2.5 billion.

Pension funds, which recently refused to volunteer their savings for a similar loan, were prevailed upon to urgently lend the government an estimated 400mn euros on Wednesday.

The government’s cash crunch means a bigger squeeze on the domestic economy, as economic sentiment sours. Latest figures show that businesses are trading cheques as IOUs valued at 75bn euros, up from 15bn in January. Given that non-performing loans are already estimated at over 85bn euros, it would not be unfair to say that the entire private sector is running on a confidence bubble almost equal to the size of Greece’s GDP.