When Will Greece Run Out of Money?

(Opinion)

12:43 PM EST MAR 31, 2015

By Nektaria Stamouli

The Wall Street Journal

Greece’s government is rushing to compile a list of economic overhauls to satisfy its creditors and secure desperately needed bailout aid. The cash-strapped country was hoping for a quick deal and an immediate disbursement, but European officials hint that several weeks might be needed before an agreement is reached.

But does Greece have that much time? Bills and debt repayments are looming, tax revenues have been weak, and every government ministry is looking under every sofa for cash.

So, when will Greece run out of money?

The truth is: Nobody knows. Even Greece. “The liquidity situation is fluid,” some senior Greek officials say. Other Greek policy makers say the piggy bank will be empty by mid-April. In recent weeks the government has tried to meet both its obligations to creditors and domestic payments – above all, pensions and public-sector wages – but it has been slipping deeper into arrears with suppliers of goods and services to the public sector. Meanwhile the government hopes that its latest tax measures will boost revenues, but it’s unclear how effective they will be. When exactly the money runs out depends on how many more domestic payments the government is willing and able to delay.

When are the next debt repayments due?

Greece has to repay a roughly €450 million ($482 million) loan from the IMF on April 9. It’s unclear whether it has enough cash left to do that. Greek officials refuse to confirm clearly that the payment will be met. Some officials hint that Athens might refuse to repay the IMF, if repayment means not paying pensions or wages. But officials from Greece’s European creditors seem relaxed about the cash crunch, viewing it as a useful source of pressure on the Syriza-led government to agree to economic overhauls, rather than as a ticking bomb.

German officials believe Greek claims of imminent default are a bluff to get bailout aid without meeting creditors’ reform demands. In 2012, German officials point out, Greece was able to keep paying the bills for month after month in a similar situation. But like the boy who cried wolf, it’s also possible that Greece really will run out sooner than creditors expect.

Does the government have any rainy-day funds left?

Not a lot. To meet domestic payments in recent weeks, the government has scraped together cash by borrowing whatever reserves it could find around the public sector. Since late February it has taken over or borrowed at least €1.2 billion from entities ranging from the central bank to the body that oversees EU agricultural subsidies and the country’s job-centre organization. About €500 million of reserves from other state entities are left to tap, according to officials.

A Treasury bill auction is expected to take place on April 8. The government needs foreign investors’ recently-waning appetite to revive. A Chinese state-controlled investment fund bought €100 million in the last auction, giving Athens some hope. The government also hope that new legislation granting incentives to Greeks to repay tax arrears will boost revenues. The regulation, passed March 20, brought in revenues of about €100 million in its first week, Prime Minister Alexis Tsipras said on Monday.

What are the key dates Greece faces?

After the April 9 IMF repayment, Greece has to repay about €2.4 billion in short-term debt held by private investors, which falls due in two parts, on April 14 and 17. A significant amount of the money can be raised by getting Greek banks to renew their holdings. How much new cash Greece needs to repay the T-bills depends on foreign investors’ appetite.

The government then has to find some €1.7 billion more for public-sector wages and pensions that would normally be paid at the end of April. Another €1.4 billion T-bill redemption is due on May 8 – followed by a hefty IMF repayment of €779 million on May 12.

But the crucial date is July 20, when a big Greek bond totalling €3.5 billion matures. The bond is owned by the European Central Bank. Failure to repay it would almost certainly be the end of the road for Greece’s euro membership, European officials say. Greece would need a large disbursement of bailout aid from its creditors before then. It definitely can’t meet that payment on its own.