Athens scrapes just enough cash for April, default looms in May

April 08, 2015 12:08
The flags of the European Union (left) and Greece are seen next to each other in Athens. Another crisis looms for Greece after it scraped barely enough money to repay creditors in April. Photo: The Guardian

Greece has scraped barely enough enough to repay bondholders this month but will run out of cash anytime soon, raising the possibility of a sovereign default in May.

A senior Greek official said a 458 million euro (US$496 million) loan instalment owed to the International Monetary Fund will be paid on April 9 as scheduled, along with another 420 million euros due to international investors when a six-month treasury bill expires on April 14.

“We will meet international obligations without any problem but it will be a squeeze to raise cash for domestic payments in the second half [of the month],” the official said.

"Next month is a different matter. We are going to run out of money unless reforms are legislated to make some bailout funds available,” he said.

 Greece has to make two further payments to the IMF in May amounting to 950 million euros on top of 2.4 billion euros pension and salary payments.

But Athens cannot raise financing by selling more treasury bills to Greek banks after a ban by the European Central Bank on increasing their exposure to the government, while foreign investors have been scared off by the country’s increased political risk.

The radical anti-austerity government has been unable to reach an agreement with the EU and IMF that would unlock 7.2 billion euros in European funding because of foot-dragging by its economic team over reforms that would contradict Syriza’s election promises not to raise taxes or back further privatisations.

Finance ministry experts are scrambling to wrap up technical talks this week with officials from the European Commission, the IMF and the ECB with the aim of reaching a deal with eurozone finance ministers in Riga on April 24.

“Our proposals are a work in progress but they’re advancing,” said a government official.

Dimitris Mardas, deputy finance minister, tried to calm concerns that pension and salary payments amounting to 1.4 billion euros at the end of the month may be delayed, saying, the government "will make these payments on the due dates following the normal practice”.

-- Contact us at [email protected]