March 26, 2015


Greece won't get the €1.2bn

For the second day in a row, the press coverage all over the eurozone was still mostly pre-occupied with the Germanwings crash in south-east France. 

Our main story continues to be Greece. We were perhaps a little too optimistic yesterday when we indicated that Greece and the eurozone were heading towards a deal. We still believe that this will happen eventually, but yesterday was one of those obstacle days - a big one.

The euro working group decided that Greece has no legal claim on the €1.2bn it transferred back from the Hellenic Financial Stability Fund to the ESM. This is a major setback for the Greek government, which had argued that those €1.2bn are an overpayment of the HFSF to the EFSF. It is only a first discussion on the issue, though. The EWG will consider how to move forward on this issue in due course, Greek Reporter cites a EWG spokesman. Even if it were approved eventually, it would take weeks for the money to arrive in Athens, as it requires EFSF approval and in some countries even parliamentary approval. 

There has been no discussion on the list of reforms, for which Greece had called this teleconference. The EWG declined to discuss the list, instructing Greek authorities to first have it signed off by the troika instead, the FT reports. This is in line with what Angela Merkel told Tsipras when he presented his list to her in Berlin on Monday. So it all comes down to getting the reform list first approved by the troika. With the recent stand-off between Greece and the troika institutions, progress is unlikely to come by soon.

Tsipras has promised to deliver the reform list by next Monday. It is not clear whether it will include measures agreed by the previous government such as privatisations and pension reform. According to Reuters, Euro zone officials have said it will be hard for Athens to make the budget numbers add up without a forecast €4bn due from the sale of state assets this year, and savings through later retirement and a merging of pension funds. Both reforms are bitterly opposed by Syriza, and ministers have already halted several planned privatisations.

The ECB, meanwhile, lifted the ELA ceiling for Greek banks to €71.1bn following a conference call between the governing council of national central bank governors and top ECB officials, according to the Wall Street Journal. This comes a day after the ECB instructed Greece’s largest commercial banks that they can’t raise their holdings of Greek government debt.

Back in Athens Yannis Stournaras urged his government to act quickly to agree on reforms with the creditors, according to Kathimerini, insisting that Greek exit from the euro area isn’t an option and wouldn’t help the country’s economy in the long term.

While there are reports that Greece will run out of money by April 20, Greece is scraping the barrel, says the Guardian, sequestering reserves of public bodies, seizing EU subsidies destined for farmers and postponing all payments for state supplies in the scramble to continue servicing its debt while paying salaries and pensions. Pension funds have been raided to raise money for Treasury bill auctions. The scheme of repo transactions is believed to have raised more than €600m in recent weeks. Earlier this month the governing coalition suspended some €300m of EU subsidies for farmers to help pay €1.7bn in public sector wages and pensions due next week. Greek subsidiaries of multinationals have also been approached for loans. 

Greece’s budget primary surplus, meanwhile, was €1.24bn for the first two months of 2015, down 40% compared to last year,  according to Macropolis. It reflects a shortfall in revenues (excl tax refunds) of €877m, lower expenditure of €731m and a higher Public Investment Budget (PIB) balance. The budget balance posted a deficit of €194m from a surplus of €487m last year, though revenues seem to be recovering in February, exceeding the monthly target by €91m with the 2-month figure ending €877m short of target.

Our other stories

Today we also have commentary on why now is the time for another treaty change; the details of what happens to Ireland in the case of Brexit; what's happening in the German economy; why something is going to give in Italy; why we're not excited about Spain's growing party; and on who's afraid of Podemos.

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