Struggling Greece puts state funds in loan basket

Author: Associated Press

ATHENS, Greece (AP) – Greece’s cash-strapped government has ordered reserves from state agencies to be placed in a basket account to help the country meet obligations, officials said Monday as bond market traders fretted over the risk of default.

Following an emergency decree, which has been sent to parliament for ratification, the funds from anything from hospitals to local government will be moved to an account at the Bank of Greece to be made available for short-term loans to the state.

The move is the latest sign that Athens’ coffers are running dry in the wake of the new left-wing government’s dispute with creditors over an economic reform program deemed necessary to get remaining bailout funds paid. The dispute has held up the payment of 7.2 billion euros ($7.7 billion) from Greece’s international bailout, money it will most likely need to pay loans due over the coming few weeks.

Greece’s lenders from the 19-country eurozone and International Monetary Fund are demanding reforms that include sweeping changes to pensions and labor rules. For Greece’s Syriza government, many of the demands are considered counter to its electoral mandate. Syriza was elected on a promise to bring an end to stifling austerity that many in the country blame for the severe economic hardship of the past few years.

Greek Energy Minister Panagiotis Lafazanis said in a weekend interview that lenders were seeking “submission and surrender” from Greece and not a fair compromise.

The impasse between Athens and creditors has ratcheted up fears that Greece will run out of money soon and leave the euro currency. That’s evident in the bond markets where Greek borrowing costs – a gauge of default risk – spiked higher once again Monday, with the rate on three-year bonds touching 28 percent.

Many in the markets think that this coming Friday could be the latest crunch point. Greek Finance Minister Yanis Varoufakis is due to meet his counterparts from the eurozone at a meeting in the Latvian capital of Riga.

Some hope of progress emerged with comments from a senior IMF official that bailout talks had gathered “a little more momentum,” but that pressure was growing on Greece.

Poul Thomsen told the German business daily Handelsblatt in an interview published Monday that Athens could have enough money to meet debt and other commitments until June but would need to reach an agreement before then. Greece has to pay around 1 billion euros to the IMF by mid-May.

“We are making progress, but we are far from the destination,” said Thomsen, who led most of Greece’s bailout inspections before taking up his current post as head of the fund’s department in Europe.

And in Brussels, EU Commission spokesman Margaritis Schinas noted that “the work has now intensified.”

On Tuesday, Prime Minister Alexis Tsipras and his energy minister, Lafazanis, are due to meet with Alexei Miller, CEO of Russian gas supplier Gazprom, in Athens. The meeting comes after Greece expressed an interest in joining a planned Russian-led gas pipeline project in the Black Sea. They are seeking a cash advance for participating in the venture.

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