US urges Greece to agree on financial deal
THE US urged Greece yesterday to strike a deal with European authorities and the International Monetary Fund (IMF) over a financial lifeline, warning failure to reach agreement would lead to immediate hardship.
The message was relayed in a phone call between US Treasury Secretary Jack Lew and Greek Finance Minister Yanis Varoufakis. “He (Mr Lew) urged Greece to find a constructive path forward in partnership with Europe and the IMF,” a Treasury official said.
Greece is expected today to submit a request to the eurozone to extend a “loan agreement” for up to six months, but European Union (EU) paymaster Germany says no such deal is on offer and Athens must stick to the terms of its international bailout.
The move, confirmed by a spokesman, is an attempt by the new leftist-led government of Prime Minister Alexis Tsipras to keep a financial lifeline for an interim period while side- stepping austerity conditions in the EU-IMF programme.
An EU source said whether finance ministers of the 19nation currency bloc, who rejected such ideas at a meeting on Monday, accept the Greek request as a basis to resume negotiations will depend on how it is formulated.
Meanwhile, Athens is burning through its cash reserves and will not be able to meet payment obligations beyond the end of next month at the latest unless it secures additional funds from its creditors, a person familiar with the figures said yesterday.
Failure to clinch a deal would leave it at risk of bankruptcy, though until now it had not been clear how much time Athens had until state coffers run dry. Greece would be able to repay a €1.5bn loan from the IMF that falls due in mid-March, but the state would struggle to make payments after that despite continuing efforts to minimise cash needs, the person said.
“Greece can cover its needs until mid-March or the latest by the end of March unless it secures additional funding from official lenders.”
Athens has repeatedly asked its eurozone partners to be allowed to issue more Treasury bills beyond an existing €15bn ceiling that it has already hit but its request has been denied.
Adding to the pressure, budget data for last month showed the state’s finances worsening sharply as Greeks held off on paying taxes ahead of the January 25 general election. That resulted in a €1bn shortfall in tax revenues, 23% below the tar- geted level, putting the country’s bail-out target of a 3% budget surplus this year in doubt.
The government has sought to play down cashflow concerns, with ministers saying the government has enough money on hand and refusing to speculate on when it might run out.
Asked at a news conference yesterday about the state’s cash reserves, Deputy Finance Minister Dimitris Mardas said: “We are trying to pay our obligations all the time, I don’t have anything else to tell you.”
Earlier the conservative daily Kathimerini said cashflow projections showed government coffers would start to run dry as early as Tuesday.
After the IMF repayment, Athens faces €800m in interest payments in April followed by a major financing hump in the summer, when it has to repay about €8bn to lenders including €6.5bn to the European Central Bank for maturing bonds.
In addition the government also faces a monthly bill of €1.5bn for public sector salaries and pensions, and also €1bn a month for social security and healthcare costs.
Shut out of capital markets in 2010, the country has survived over the past four and a half years on a continued stream of €240bn in aid from the EU and IMF.