Greek state finances wilt as talks with creditors grind on

Author: Associated Press

ATHENS, Greece (AP) – Greece has slipped back into deficit so far this year and faces a cash crunch in coming weeks, but the country nevertheless managed to pay a debt obligation to the International Monetary Fund, one of its main rescue creditors.

Left-wing Prime Minister Alexis Tsipras, meanwhile, promised Monday that state salaries and pensions were not in danger.

The central government’s cash balance was 684 million euros ($723 million) in deficit for the first two months of the year, compared with a surplus of 139 million euros ($147 million) in the same period of 2014, the central bank said.

Excluding interest payments on debt, the surplus fell to 503 million euros ($532 million) from 1.68 billion euros ($1.78 billion) a year ago.

Tsipras’ Syriza party won elections Jan. 25 on a pledge to lighten the country’s rescue loans. It also wants to ease the budget surplus targets demanded by the rescue creditors, arguing they are too high and hindering the economic recovery. The budget targets, which have involved spending cuts and tax increases, were meant to reduce debt but have also hurt the economy, putting it through a savage six-year recession.

In a newspaper interview Monday, Tsipras renewed government assurances that state salaries and pensions would not be affected by the tough ongoing negotiations with bailout creditors.

“We cannot hear such things, not even as a joke,” Tsipras told the Athens daily Ethnos. “There is no danger for salaries and pensions … and no threat to bank deposits.”

Tsipras’ government has convinced creditors to give it a four-month extension on the bailout program, but to get the money it must still detail a list of reforms by the end of April. If creditors do not approve the reforms, they will not unlock some 7 billion euros ($7.4 billion) remaining in the loan funds.

Greece on Monday repaid a loan worth some 584 million euros ($615 million) to the International Monetary Fund, a finance ministry official told the AP. But it faces a punishing repayment schedule though the summer, leaving it dependent on the bailout cash remainder.

Technical teams from the European Commission, European Central Bank and International Monetary Fund – a group collectively known as the “troika,” a term dropped from official use at Greek insistence – are in Athens to review Greek proposals.

“I won’t hide from you that there are very many difficulties in the ongoing negotiations,” Tsipras said. “There still are voices of intransigence … The key to reaching an honorable compromise is the recognition that the previous policy of extreme austerity has failed.”

Christian Schulz, a senior economist at Berenberg Bank, said the eurozone was unlikely to give in to Greek demands on the reforms measures.

“Greece and the eurozone remain in different story lines,” he said. “While the eurozone thinks it has given Greece time to implement the necessary reforms to secure funding, the Greek government seems to think it has been given time to negotiate a new grand bargain with the eurozone.”

In Brussels, EU Commission spokesman Margaritis Schinas described Greece’s situation as “serious.”

“There are technical discussions underway, including discussions being held in Athens. The commission feels that right now, it’s time to work, not make statements.”

Uncertainty over Greece weighed on shares on the Athens Stock Exchange, which closed nearly 1 percent lower despite gains across Europe.

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