In Greece, Desperate Times and Offbeat Measures

By LIZ ALDERMANMARCH 7, 2015

The New York Times

PARIS — Despite the European accord last month to extend a financial lifeline to Greece, Athens is rapidly running out of cash.

So it is scrambling to find new, even radical ways to fill the shortfall — including a proposal to recruit citizens and tourists to spy on suspected tax evaders.

Greece’s coffers may be empty before the end of this month, as tax receipts shrink and the economy shows signs of lapsing back into recession. Athens officials have hinted they may have trouble repaying or refinancing a total of about 7 billion euros, or $7.7 billion, owed in March to the International Monetary Fund and other creditors, or meeting government salary and pension obligations.

Prime Minister Alexis Tsipras has tried to reassure creditors that Greece will not default. But in a sign of how desperately Greece needs money, his government plans on Monday to present a raft of measures to European finance ministers in Brussels in hopes of unlocking aid quickly.

That includes a proposal to enlist “casual” tax spies — tourists, students, housekeepers and other nonprofessional inspectors — “to pose, after some basic training, as customers, on behalf of the tax authorities, while wired for sound and video,” according to a letter accompanying the proposals that the Greek finance minister, Yanis Varoufakis, sent last week to Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers.

With tax arrears in Greece at €76 billion, the proposal is intended to scare tax dodgers and engender “a new tax compliance culture,” the letter said.

In the near term, Athens is scrambling for additional ways to pay its bills. The possibilities include borrowing from government pension and social security funds, withholding payments to hospitals and universities or dipping into subsidies for farmers.

Jens Bastian, a financial consultant in Athens and a former member of the European Commission’s task force on Greece, said such measures underscored the depth of the country’s financial problems. “The situation is dire, and this government is finding out in real time how difficult it is to meet its multiple obligations,” he said. “It tells you something about the sheer level of desperation they face to identify any funding resources wherever they can pinch pennies.”

Although European officials have agreed to disburse an additional €7 billion from Greece’s €240 billion bailout program, they are holding tight to the money through at least April — unless the Tsipras government pledges not to roll back austerity without their say-so and is able to push through various structural changes in the economy.

The Brussels session on Monday with the Eurogroup will be the latest in a series of crisis-driven meetings about Greece since Mr. Tsipras’s Syriza-party-led government was voted into office in January on the promise of striking a better deal for its austerity-weary citizens.

But with money running out, Mr. Tsipras is confronting a cold truth: After five years of being supported by international bailouts, Greece has still not made enough progress in restructuring the economy and improving tax collection to stand on its own, making it hard to press anti-austerity claims with creditors.

The problem reverberates beyond government balance sheets. Spyros Xanthis, the managing director of Xanthis, a family-owned marine exporting company in the port of Piraeus, said that last summer business had just begun to stabilize from a slump of 50 percent during the crisis. But renewed uncertainty about Greece’s financial stability — and especially concerns that Greece might default or worse — has dealt a fresh blow to his international sales.

“Now everything we regained has been lost,” he said. “We are back to where we started.”

Greece’s cash position improved modestly over the last two years, but it has recently started to decline again. The government had €6.6 billion euros on deposit at the Greek central bank in January, compared with €7.1 billion in December, partly because of an unexpected €1 billion shortfall in January tax receipts.

Another revenue source, a program to sell state assets, has essentially been suspended by the new government. In addition, the European Central Bank has rebuffed requests to let Greece issue as much as €10 billion in additional short-term debt, on top of a current €15 billion cap, to obtain more financing.

On Thursday, the European Central Bank, one of Greece’s biggest creditors, did agree to add €500 million to an emergency credit line for Greece’s commercial banks. But the central bank’s president, Mario Draghi, said any further assistance to Athens would depend on whether the Tsipras government was willing to make significant economic changes.

Greece’s financial situation will probably grow worse before it improves. In the middle of 2014, it was experiencing a mild recovery after a half-decade recession in which the economy shrank by one-fourth. But the gross domestic product fell 0.4 percent in the October-December period, compared with the preceding quarter. If growth shrinks again in the first quarter as expected, Greece will officially re-enter a recession.

At Mr. Xanthis’s marine goods export firm, the crisis took a toll beyond sales. While none of his 11 employees were laid off, he said, they all agreed to take pay cuts of up to 35 percent to help make up for losses. In turn, they cut their personal spending on nearly everything but necessities.

Mr. Xanthis fears the potential consequences if Greece’s financial situation worsens. “It would be catastrophic if Greece were to exit the eurozone,” he said. “It would take years before there was a recovery.”

Nearby, in Piraeus, just south of Athens, Paul Politakis, the owner of a men’s clothing shop, said sales of his suits, shirts and accessories had started to fall again after last year’s slight recovery. Even though he has lowered his prices, “people don’t have enough money to spend,” Mr. Politakis said. “You’re talking about a country that still has 25 percent unemployment, and millions of people who owe taxes and money to the state that they can’t pay.”

Last week, the government exhorted Greeks to pay their taxes — or at least pay what they could. “It’s part of our patriotic duty,” Mr. Varoufakis said.

To gain access to early bailout aid, the letter Mr. Varoufakis will present in Brussels on Monday includes the creation of a so-called fiscal council to generate savings, new rules for lottery and gambling licenses aimed at raising revenue and streamlining the bureaucracy to stimulate business investment.

The package will also include “humanitarian relief” proposals, including the provision of food stamps to 300,000 poor Greeks and the reconnection of electricity to struggling households whose utility bills the government will partly pay. The authorities will also let tax debtors use installments to pay off what they owe. Greece will need to offset those costs through other cuts, or tax increases, if it is to persuade creditors to dispense the bailout money.

To avoid default, Greece found a way to pay this month’s bills, which include €1.53 billion owed to the International Monetary Fund by March 20. A first payment on that amount, around €300 million, was made on Friday.

But this month, Greece must also pay around €4.6 billion in Treasury bill redemptions, and at least €1 billion in government salary and pension obligations.

Things will not necessarily become easier after that. From April through August, Greece will need to finance an additional €10.2 billion in Treasury bill redemptions and repay approximately €3.17 billion to the I.M.F and €6.5 billion to the European Central Bank.

Given those burdens, some European officials say Greece may need its third bailout since 2010.

Last week, Spain’s finance minister said European creditors were discussing a new Greek lifeline of €30 billion to €50 billion. Although officials in Athens and Brussels denied that talks were underway, many analysts consider it only a matter of time before Greece requires a new rescue package.

But for now, Greece has no choice but to figure out how pay its own way, Dimitris Mardas, Greece’s deputy finance minister, said in an interview.

“We ourselves will pay our obligations,” Mr. Mardas said.

Niki Kitsantonis contributed reporting from Athens.