BRUSSELS--Greece faces a cash crunch in the coming weeks with
little hope of financial help soon from the rest of the eurozone,
threatening a serious blow to the country's fragile economy.
Though the Greek government secured an extension of its bailout
program last week, that doesn't give Athens access to cash pledged
to it from the eurozone and the International Monetary Fund. To
unlock that money, it will need to agree on a revised program of
austerity measures and economic overhauls with its creditors, and
pass them into law.
That process is likely to take months of fraught
negotiations--but Greece doesn't have that kind of time. It must
repay the IMF EUR1.5 billion ($1.7 billion) in March alone, with
the first installment of nearly EUR300 million due on Friday.
Caught between dwindling tax receipts and requirements to repay
debt soon to the IMF, Athens could face trouble paying its bills
before the end of March, eurozone officials say.
That would leave the country's new left-wing government with
some grim choices: raid existing government cash reserves and
further delay payment to its suppliers, a tactic repeatedly used by
previous Greek governments that has further strangled the economy
over the last five years.
Greek Finance Minister Yanis Varoufakis, in an interview with
the Associated Press over the weekend, said the government would
make debt payments to the IMF its priority, vowing to "squeeze
blood out of stone" to repay it. A Greek government spokesman
couldn't immediately be reached for comment.
The eurozone is unlikely to give Athens a break, even if it is
running out of cash, said Valdis Dombrovskis, vice president of the
European Commission, which is charged with monitoring Greece's
performance under the program along with the IMF and the European
Central Bank.
"In this case, they will need to speed up program
implementation," Mr. Dombrovskis said.
Bickering between the government of new Greek Prime Minister
Alexis Tsipras and the rest of the currency bloc continues despite
the deal to extend Greece's bailout. Mr. Tsipras on Saturday
accused the conservative governments in Spain and Portugal of
conspiring against Greece and trying to "drive us into financial
asphyxia." Spain and Portugal filed protests with the commission in
response on Monday. Martin Jäger, spokesman for German Finance
Minister Wolfgang Schäuble, said Mr. Tsipras's comments represented
"very unusual foul play."
Nor is Athens likely to be granted its preferred option: an
increase in the EUR15 billion cap on the amount of short-term Greek
government debt that Greek banks are allowed to buy. Eurozone
officials say the ECB, which now regulates banks across the
eurozone, doesn't want to let the banks load up further on the
risky debt of its government.
That leaves Athens with few options, none of them appealing. The
government may have EUR2 billion in cash left over from last year,
estimates James Nixon, chief economist at Oxford Economics, a
consultancy based in the U.K. Another EUR2 billion may be left in
various government funds, such as Greece's beleaguered
social-security funds, and the government could find another EUR1
billion by delaying payment to suppliers, Mr. Nixon said.
But these measures would likely starve the Greek economy of
much-needed cash and tip the economy back into recession, if it
isn't already there, he said.
"The financing through to the summer is inevitably going to
require quite a sharp increase in arrears if they are going to make
their repayments to the IMF," Mr. Nixon said. "Even if Greece
manages to survive, it will be seat-of-the-pants,
finger-tips-on-the-edge-of-the-precipice, which will really exact a
toll on the rest of the economy."
A senior eurozone official said the Greek government's existing
cash reserves might last until May, provided its tax receipts don't
continue to collapse. Eurozone officials have expressed
exasperation with promises from the new government to allow people
to pay late taxes in up to 100 installments.
"If they continue doing stupid things, like inciting everybody
to not pay taxes," the official said, "then they are in trouble
already in late March."
The Greek government has delayed payments to suppliers and
refunds owed to taxpayers throughout the crisis, while it awaited
loan disbursements from its creditors, who were wary of giving more
money to Athens.
Economists say the economy has been hard hit by these delays,
which have extensive knock-on effects: Suppliers that aren't paid
by the government, in turn, struggle to pay their suppliers and
employees.
That problem became particularly acute in 2012, when Greece went
for months without a new loan disbursement from the eurozone and
the IMF.
Overdue payments swelled to EUR9.4 billion at the end of the
year, up from EUR5.4 billion in 2010.
This time around, the negotiations to get money flowing again to
Athens are likely to be much tougher. And trust between Mr. Tsipras
and the rest of the eurozone is almost nonexistent.
"I think the market has been relatively relaxed after last
week's Eurogroup, but the mood music continues be quite negative,"
Mr. Nixon said, referring to the meeting of eurozone finance
ministers that agreed to the bailout extension. "This still has
plenty of capacity to become quite serious, very quickly."
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