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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.

ekathimerini.com , Friday May 18, 2012 (22:18)  
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