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Gov’t mulls
options if coffers run dry
The Finance Ministry is urgently looking into alternative scenarios of how to
maintain its weak cash reserves if the revenue inflows outlook deteriorates.
The only apparently safe option is to cut or suspend certain expenses. The
total in June is projected at 5 billion euros, of which 4 billion is expected to
flow in from the International Monetary Fund and the European Financial
Stability Facility (EFSF).
The representatives of the country’s creditors -- collectively known as the
troika -- may have put off their visit until after the formation of a Greek
government but technical cooperation with the General Accounts Office (GAO) and
monitoring of the budget is continuing on a daily basis. Sources report that
besides political developments, the troika is “particularly concerned” at the
recession of the Greek economy and developments in the budget.
The public coffers are seen running dry at the end of June, but this will
depend on two key factors. First, revenue collection: In the first 10 days of
May, inflows were about 15 percent lower than projected but there are fears that
the slide may reach 50 percent. The GAO will have a picture for the first 20
days on May 23, while the last three days of the month are considered crucial,
when 1.5 billion euros of the month’s budgeted total of 3.6 billion are expected
to flow in.
Second, whether the IMF and EFSF installments are disbursed: This is not
certain, as the decision will be purely political for both providers and
evidently partly linked to political developments. Earlier this month the
eurozone approved a disbursement 1 billion short of the 5 billion euros that
were expected.
If revenue collection keeps faltering and the IMF and EFSF loans do not
arrive, the first option the ministry is considering is cuts in income tax
rebates and credits to social security funds. It may also trim grants to various
state agencies and payments to public sector suppliers. This particular tactic
was employed last September and enabled the government to retain cash until
mid-December.
Another option considered is to continue to issue treasury bills. Of the
budgeted 5 billion in expenses, 3.6 billion euros comprise the refinancing of
T-bills and interest payments.
There is also the option of not paying Greece’s contribution to the EFSF,
which amounts to 900 million in June. The eurozone may approve its postponement
to July or August.
Finally, the government may use part of the resources of the Financial
Stability Fund (FSF), which are mainly earmarked for the recapitalization of
banks. The fund currently has a reserve of 3 billion euros.
According to statements by FSF members, the fund will disburse 18 billion on
Tuesday or Wednesday to boost banks’ capital base. National Bank of Greece will
receive 6.9 billion, Eurobank 4.2 billion, Alpha Bank 1.9 billion and Piraeus
Bank 5 billion euros. | 
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