Greece Grabs Cash as More Than $2 Billion in Payouts Loom

by Nikos Chrysoloras, Vassilis Karamanis, Christos Ziotis

(Bloomberg) -- Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than 2 billion euros ($2.12 billion) in debt payments Friday.

Unable to access bailout funding and locked out of capital markets, the government will outline emergency plans to parliament Tuesday to increase funding. Payments due March 20 include interest on a swap originally arranged by Goldman Sachs Group Inc., said a person familiar with the matter who asked not to be identified publicly discussing the derivative.

Prime Minister Alexis Tsipras’s government is burning through cash while trying to get its creditors -- euro area member states, the European Central Bank and the International Monetary Fund -- to release more money from its 240 billion-euro bailout program. European governments have said they won’t disburse any more emergency loans unless the government in Athens implements a set of economic overhauls agreed last month, including pension and sales tax reform.

“As days go by, room for maneuver becomes ever smaller,” said Theodore Pelagidis, an Athens-based senior fellow at the Brookings Institution. “The impression given is that there’s no plan A or plan B. There’s nothing.”

The government’s plan includes eliminating fines on those who submit overdue taxes by March 27 to encourage payment, helping cover salaries and pensions due at the end of the month. The bill also requires pension funds and public entities to invest reserves held at the Bank of Greece in government securities and repurchase agreements, and transfers 556 million euros from the country’s bank recapitalization fund to the state. A vote on the measures is scheduled for Wednesday.

Ending Austerity

The government said March 14 it has a plan to “enhance its liquidity” and won’t have problems meeting payments for civil servants and retirees due just one week after the March 20th debt payments. Tsipras has pledged to meet the country’s obligations while at the same time ending austerity measures.

“None of my colleagues, or anyone in the international institutions, can tell me how this is supposed to work,” German Finance Minister Wolfgang Schaeuble said in Berlin Monday. Greek leaders are “lying to the population,” he said.

The government plans to auction 1 billion euros of treasury bills on March 18. As much as 60 percent of the auctioned amount can be tapped on top of that in non-competitive and second-day bids. The money will be used to roll over 1.6 billion euros of short-term notes due March 20.

The same day, Europe’s most indebted state is scheduled to repay about 350 million euros to the IMF, while interest due on four bonds held by the ECB total about 110 million euros.

Goldman Swap

The Goldman Sachs derivative, now held by the National Bank of Greece, masked the country’s growing debt when it was agreed in 2001, helping it meet European Union rules for entering the euro area. The interest payment adds to the country’s funding woes as the government misses budget targets and the ECB refuses to allow Greek banks to keep the country afloat with additional short-term debt.

Spokesmen for the National Bank of Greece and Goldman Sachs declined to comment on the amount due for the swap, and the government didn’t respond to calls and text messages seeking comment.

Greece’s 2014 primary budget surplus was just 0.3 percent of gross domestic product, missing a target of 1.5 percent, according to preliminary data released Monday by the finance ministry.

Euclid Tsakalotos, Greece’s deputy foreign minister, said Monday that the ECB is partly to blame for Greece’s cash crunch. Tsipras and Finance Minister Yanis Varoufakis have asked on several occasions for creditors to allow more short-term notes to be issued and bought by Greek lenders to help the country meet obligations in the next weeks.

ECB Review

ECB President Mario Draghi has poured cold water on Greek demands, saying emergency funding facilities, which are keeping the country’s lenders afloat after a massive deposit outflow, can’t be used to tide over the government.

The ECB will review the liquidity position of Greek banks on March 19, the same day European Union leaders convene in Brussels. Tsipras may raise the issue of the country’s cash-flow problem in his first bilateral meeting with German Chancellor Angela Merkel on March 23.

“Vagueness from the Greek side continues and so does pressure from the euro area counterparts,” said Aristides Hatzis, associate professor of law and economics at the University of Athens. “The cat-and-mouse game is expected to continue until June.”

To contact the reporters on this story: Nikos Chrysoloras in Athens at nchrysoloras@bloomberg.net; Vassilis Karamanis in Athens at vkaramanis1@bloomberg.net; Christos Ziotis in Athens at cziotis@bloomberg.net

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net Chad Thomas, Celeste Perri