A week ago the world and Greece alike were stunned to learn [5]that the financial situation in Athens is so atrocious, the government, through an emergency decree, was forced to not only "borrow" funds from pensioners, but would also confiscate any available cash held by municipal entities such as mayor's offices, the national opera, the art gallery and even hospitals and kindergartens, in order to make its upcoming payments to the Troika, as well as to help with rolling over debt maturities, of which as a reminder there are many.
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The government had hoped this act of desperation would raise up to €2.5 billion in funding, carrying Greece though the end of May, however according to initial media reports the practical limits of this action would lead to at most €500-600 million in new funds raised, not nearly enough to cover the €1 billion in Greek payments due to the IMF in May alone.
Earlier today, while the European markets were caught in the latest myopic buying frenzy resulting from the hope that an imminent termination of Yanis Varoufakis may mean a Greek debt deal is imminent, the Central Union of Municipalities and Communities of Greece ("KEDE") held a meeting [7]in which it said that while it "declares it support for the national negotiating effort", it would not transfer any funds to the Bank of Greece.
As Bloomberg confirms, the union said "they won’t transfer cash reserves to Bank of Greece until PM’s promises to them are passed into law, according to statement today on Athens-based body’s website. Govt must also make clear how the Bank of Greece will manage these funds."
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On its website [7], the Union added that it would consider whether it would change its position on Thursday, May 7, one day ahead of a €1.4 billion T-Bill maturity, and five days ahead of a €760 million payment to the IMF.
Not unexpectedly, the municipalities are less than excited by the prospect of handing over their rainy day slush fund just so the IMF can pay its muppet regime in Ukraine for a few more months. As a result, they have objected to the government's emergency decree, and have come up with conditions of their own before they hand over the funds (if ever):
the exclusion of compensatory fees from the current law, the exclusion of the municipalities budgets have financial commitments, the assumption by the State's liability to cover legal issues for payment of clauses or Municipalities responsibilities and Mayors, to clarify the mechanism by which it will be managing our money through the Bank of Greece once submitted, to ensure immediate cash management from commercial banks.
Kathimerini has more [9]:
An attempt by Education Minister Aristides Baltas (photo) to convince rectors to transfer their reserves to a Bank of Greece account and help the central government pay its dues was met with resistance as the rectors insisted on a meeting with Prime Minister Alexis Tsipras to discuss the demand in detail.
The decree, issued last week, obliges all state organizations ranging from local authorities to universities to transfer their cash reserves to the government, noting that the money will earn a generous interest rate and can be returned to the organizations if necessary.
Baltas sought to win over the rectors during an emergency meeting on Monday by promising that funding set aside for research would be exempted from the transfer. But the academics appeared unmoved, insisting on an audience with the premier.
Meanwhile, the country’s secondary school teachers’ union (OLME) lashed out against the government’s attempt to take the reserves of municipalities and regional authorities. It accused the government of “grabbing money” and “instead of providing relief for the the working classes, it uses it to satisfy the needs of creditors.”
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The country’s mayors have been divided over whether to follow suit. Following a long meeting on Monday, Greek mayors agreed not to transfer any cash reserves to the Bank of Greece until certain exemptions that they said Tsipras’s has agreed to have been voted through Parliament.
Long story short, what was originally supposed to be an emergency rainy day fund collection of €2.5 billion will be €0.0 billion instead, at least for the next 10 days, and probably beyond.
Which, in a world where Greece's obligations to the Troika can not be simply met with a Yanis Varoufakis resignation, means that the latest bout of Greek risk asset optimism will be very short-lived.
Which brings us to the flowchart of the day: what UBS dubs the "likely consequences of non-payment by the Greek government." It is relevant, because unless Varoufakis can come up with another plan to "confiscate" a few billion from some Greek entity, it is precisely what next steps fore Greece are.
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