Alternate Finance Minister Dimitris Mardas was present at the emergency meeting called by the Central Union of Municipalities of Greece (KEDE) following a government decree for public bodies to transfer funds to the Bank of Greece (BoG). Mardas explained that the government hopes in this way to cover a “gap” in its finances worth 552 mln euros. He explained that the Local Authorities Association (OTA) would be able to have immediate access to 10% of their funds but would need to give two days notice in cases where larger amounts were needed.

Mardas explained that the government’s move is not comparable to the restructuring of the Greek sovereign debt PSI practised in the past. During his briefing, Mardas pointed to a recent government amendment that guarantees cash reserves of public-sector bodies with a right to compensation from the state. He also cited the case of Attiko Metro that recently withdrew 150 mln euros from the central bank. He explained that regions should calculate their needs for the next fortnight, keeping requiring funds and depositing the rest in a special account at the Bank of Greece that would offer 2.5% interest.

The move is expected to yield 2.5 bln euros to be placed in repos and used for the country’s current needs. Local authorities opposing the move state that the decision violates the premise that regions have self-governance. Furthermore, concerns were voiced regarding the affect that the move would have on growth projects under National Strategic Reference Framework funds.

Brussels positive reaction

A European official in Brussels told journalists that the move being exercised is one that representatives of Greece’s international creditors from the European Commission, European Central Bank and International Monetary Fund had urged for quite some time. The source said that institutions had called for the central bank to gain control of the regional reserves. Furthermore, the same source stressed that it would be extremely difficult for the Greek government to come up with a complete list of reforms by the end of Athens, pointing to a new deadline until the end of June.