The Economy

Greece Orders Seizure of Local Government Cash

The country's public-sector entities are forced to remove their cash reserves from commercial banks.
Matthew HellerApril 21, 2015
Greece Orders Seizure of Local Government Cash

With Greece’s cash crisis continuing to get ever more dire, the government has ordered public-sector entities to transfer cash reserves now held in commercial banks to the central bank.

The administration of new Prime Minister Alexis Tsipras cited “extremely urgent and unforeseen needs” in taking a fiscal step that Bloomberg said could raise about 2 billion euros ($2.15 billion). Athens has been teetering on the edge of a debt default and is scrambling to find funds to pay almost 2 billion euros in wages and pensions and almost 1 billion euros to the International Monetary Fund in coming weeks.

“Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece,” a presidential decree issued Monday on a government website said.

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Greece owes money to the IMF, the European Central Bank (ECB), and the European Commission following two bailouts totaling 240 billion euros in 2010 and 2012. Amid the cash crisis, it has been trying to convince its international creditors to release the last 7.2 billion euro chunk of rescue funds, but European leaders want Greece to do more to revamp its debt-burdened economy.

European officials addressed the matter at IMF meetings in Washington in recent days. “There has been a little bit more impetus in the negotiations between the three institutions and the Greek government for several days,” Europe’s IMF chief Poul Thomsen said, according to The Telegraph.

He calculated that Athens could last without fresh funds until June at the very latest.

ECB governing council member Christian Noyer warned Monday that a Greek default on its 313 billion euros of obligations and a euro exit would be traumatic for the euro zone and plunge Greece into a major crisis.

“It is therefore urgent that Greece put an end to the current situation and that Athens should establish a program with the IMF and the backing of other euro zone countries in order to reestablish confidence,” he said in an interview with the French newspaper Le Figaro.