Greece in the month ahead

Greece's return<p>Greece's return</p>

What are the details of the financial situation facing Greece in the month ahead?

The coverage of funding needs is maybe the most imminent problem for the new Greek government. For April, Greece has to rollover two T-Bills issues of €2.4 billion. The first roll-over of a €1.4 billion 6-month T-Bill is the most critical since foreign investors reportedly hold around 50% of those T-Bills and are reluctant to roll over their positions, as they consistently have done since last December.

So around €700 million have to be purchased by other investors, excluding Greek banks, which are legally bound by the ECB to increase their T-Bill holdings. On top of that, Greece has to pay around €450 million to the IMF. The 6-month T-Bill auction will probably take place on April 7 and the IMF payment is due on April 9. These are the two key dates for Greece’s funding needs in April.

Will the government need to draw on funds from state bodies in order to meet its debt obligations, while at the same time keeping the economy afloat?

The state has recently received €867 million from the Hellenic Financial Stability Fund (HFSF) cash reserves, but it is not clear whether a part of those funds has already been used for paying some of March’s funding obligations. In addition, the state can utilize more than €200 million from the cash reserves of two general government bodies that recently decided to support the state’s funding needs.  However, it is not known what the current level of the state’s cash reserves are, and whether cash reserves of other state-controlled companies can still be tapped. That said, Greek media citing Finance Ministry sources note that Greece will pay the IMF as scheduled on April 9.

How is the government addressing the issue of privatisations in negotiations with creditor nations?

 In the latest detailed list sent to its eurozone partners, Greece pledged to privatization revenues of €1.5 billion for 2015, €700 million lower than the target of €2.2 billion set by the previous government.  The key projects that are expected to be completed are the Piraeus Port Authority (OLP), Mutual Horsebetting Licence (ODIE) and regional airports. The first project is in progress, while the other two are currently in their final stages.

Is this representative of a change of strategy by the government?

Rather than seeking what it believes would be the fire sale of assets, the government’s approach is to opt for public-private collaboration agreements in which the state maintains a sizeable stake, secures the investors’ property rights, helps develop local economies and can ensure labour rights are protected.

In addition, the government envisages that privatisation proceeds would partly finance the pension funds through dividends. This would raise a new obstacle in the ongoing negotiations with the institutional lenders since, before a critical Eurogroup meeting in November 2012, the previous government had decreed legislation of strict management of privatisation proceeds, which would be placed into a special escrow account to be used solely for debt reduction purposes.

 

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