The Greek government is attempting to raid funds earmarked for social security in order to meet state pension and public sector wage bills this month.
In a recent interview, Greek finance minister Yanis Varoufakis acknowledged that the country was facing a squeeze on its finances following disappointingly low tax revenues in January. He said that “we have money to pay salaries and pensions of public employees…[but] for the rest we will see”. Yet it appears that even that now appears to have been optimistic.
According to the Financial Times, Athens is putting pressure on government departments to hand place their bank deposits into a Common Fund, managed by the Central Bank. This would give central government more control over how it manages the nation’s finances as it seeks to raise €1.2 billion in debt repayments owed to the IMF by March 2o and a further €1.5 billion in additional cash to pay for the state’s pension and wage bills.
All in all the state entities are estimated to hold €2bn of cash reserves, enough to get the government through the next couple of months as it negotiates with the European Commission, the ECB and the IMF on a reform programme that would unlock the next tranche of bailout funds. However, handing over the money could put key social security programmes at risk if those negotiations fail, including support for the unemployed.
The FT reports Theodoros Ambatzoglou, chairman of the OAED, which manages the country’s unemployment benefits programme, as saying that transferring the funds is “too risky a step to take” as a Greek default could compromise the programme and even mean criminal charges levied against those who allowed the programmes to fail.
However, if its overtures are refused the government could itself go down the legal route to force departments to comply with its request. It could dust off a seldom used law that bans state bodies from holding deposits at commercial banks for more than 15 days in order to compel them to hand over the cash.
The strains of the Syriza-led government’s hardline approach to its negotiations is finally beginning to show, it seems.
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