Greece cash reserves dangerously low, EU and IMF are preparing “take-it-or-leave-it” ultimatum

Greece still needs to find more than E1 billion in order to cover salary and pension payments it will face at the end of this month, an EU source has told MNI, after the cash-strapped government was forced to tap an emergency escrow account in order to meet a critical payment to the International Monetary Fund.

EU sources confirmed to MNI that Greece used a reserve account of Special Drawing Rights (SDR) to cover an E750 million IMF loan repayment due Tuesday. A Bank of Greece source said that the money in the account was available and unclaimed, and a last-minute solution was found to meet the IMF deadline. However, the funds need to be returned in a few weeks’ time.

“Greece right now has around E90 million only in reserves to pay wages and pensions in May,” which amount to around E1.2 billion, a senior EU source said.

“The quick fix of the SDR account just keeps the Greek government going without default but it now has to race against time to raise the money,” to meet its internal obligations. MNI reported Monday that the EU was getting increasingly worried whether Greece would made the payment after Prime Minister Alexis Tsipras informed the EU and the European Central Bank last week that he was unable to raise the amount.

High ranking EU sources have said that Commission President Jean-Claude Juncker and ECB President Mario Draghi were in constant contact with Athens to find the solution and that Draghi himself wanted to make sure that “things will stay in course.”

The government’s search for liquidity in lieu of the frozen E7.2 billion in bailout funds has included a drive to recover excess cash from local administrations and other public entities. As of Monday, the government said, its collected around E600 million, but a second senior Eurogroup source told MNI that any further cash collected raised from government organizations that haven’t handed in reserves would only cover a few more weeks of liquidity needs.

On Monday, while Eurogroup President Jeroen Dijsselbloem said he could not have a clear picture of the Greek liquidity situation, Finance Minister, Yiannis Varoufakis said “let’s not hide, liquidity is a terribly urgent issue.”

Both sources indicated that despite the positive statement on bailout talks by the Eurogroup Monday, key differences remain as neither side seems to be backing down from pension, labour and fiscal adjustments.

“The creditors will not back down because, first, the budget must be balanced which could mean further measures,” one official said. “Second, labour and pensions reforms are important,” he added, reiterating that there is still no clear picture on the Greek budget situation.

The second official commented that “both sides want a speedy solution, the climate in discussions is more positive and productive but no real breakthrough has been achieved.”

“We would wait to see in the following weeks, but so far as Mr Varoufakis said, the government remains firm to its position. But this is not possible,” the source said.

While some progress is said to be reached on issues such as non-performing loans on Greek bank balance sheets, privatizations and taxation, the talks could be stuck at any point when a difference of opinion emerges in the estimations of the fiscal situation, the sources said.

“Bigger gaps mean further measures,” the first source said wandering whether the Greek side will be able to accept it. “But liquidity is indeed running out so sooner or later we would have to come to a decision,” he added, mentioning that any extension of the programme is not realistic because it would mean that Greece will be able to cope through an extension without funds.

Sources have told MNI that if the two sides fail to agree in the next three weeks, the EU and the IMF are preparing a complete package proposal that will be presented to the Greek government with a “take-it-or-leave-it” ultimatum.


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