Greeks see cash run out in undeclared default
- 4 May 2015
- From the section Europe
When will Greece run out of money? The question has been vexing European capitals and the markets for months, as the stand-off between the new government in Athens and its eurozone creditors remains unresolved.
So far, Greece has managed to both service its external debt and pay for wages and pensions.
But the worst kept secret in the country is that for thousands of people, businesses and institutions relying on government pay cheques, in every practical sense, Greece is already out of money.
Greece has not received any loans from the eurozone or the IMF since August 2014.
There is €7.2bn (£5.3bn;$8bn) left in the country's bailout program, but creditors refuse to release the money before their demands for further reforms, spending cuts and tax increases are satisfied by Athens.
The Greek government, led since January by the leftist Syriza party of Prime Minister Alexis Tsipras, is refusing to "violate its anti-austerity mandate".
Without loans from official creditors or access to the international bond markets, Greece has so far covered its financing needs by resorting to extraordinary and controversial measures.
These have included the forced transfer of the cash reserves of public sector entities such as regional governments and pension funds to the central government's coffers.
Pensioners were alarmed to discover last week that they could not make their usual withdrawals from ATMs on the day their accounts were supposedly credited. The money became available with several hours' delay.
The government attributed the delay to a "technical problem".
But reports in the Greek press and the Financial Times gave a less benign explanation: government pension funds had struggled until the last minute to find enough cash to cover pension claims.
For several categories of employees working for the wider public sector, the feeling of finding zero balance on your payroll account is all too familiar.
"We are now running one month behind on our salaries. Until only recently we were two months behind, and no-one would tell us if and when we would get our next pay cheque," an office employee at a cultural institution funded by the state budget told the BBC.
The cash crunch is felt even by public institutions as sensitive as hospitals.
A junior doctor told the BBC that although wages were paid regularly to medical staff, the government was more than four months behind on payments for on-call time.
"Last week we got paid on-call time for the month of December," she said.
Hospital suppliers that provide healthcare units with everything from bandages to dialysis machines warned last week that they may be forced to stop supplying hospitals.
"In the past four months we are experiencing an undeclared suspension of payments," their associations said in a recent statement.
Greece's de facto domestic default extends to most sectors, from academic book publishers to military contractors.
"Payments are long overdue. Before, there was at least a regular flow of payments from the education ministry. Now, we are told to wait," a publishing house executive told the BBC.
And the chief executive of an army food contractor said his company had not received any money for products it had delivered to Greece's armed forces some time ago.
"Everyone in my sector used to fight hard to do business with the state: it was profitable and safe. Now, the government is the worst customer."
Even industrial conglomerates are feeling the pain caused by liquidity shortages, increasing borrowing costs and frozen credit lines.
Time running out
Firms are postponing much-needed investment and are pleading for a resolution, says Theodore Fessas, chairman of the Hellenic Federation of Enterprises (SEV), which represents companies from most branches and sectors of the Greek economy.
"Uncertainty is the greatest problem today. It is now threatening even the healthiest businesses, those that managed, despite the crisis, to pay wages and taxes on time, and fulfil all their obligations."
The urgency of the situation appears to have had little impact on either the Greek government or the EU.
The cabinet in Athens last week failed to approve new reforms and tax increases that it needs to convince eurozone finance ministers to unlock loans at their next scheduled meeting on 11 May.
Greece's urgent payment demands
- 12 May: more than €750m for a repayment to the IMF
- June: more than €2.6bn including €1bn to IMF
- July-August: more than €8.7bn, including €7bn to European Central Bank in bond redemptions
Analysts warn that this kind of money will be impossible to raise without new bailout loans.
For their part, eurozone officials believe time is pressing Greece, not Europe, and have openly admitted they have plans in place to avoid contagion if Greece defaults or exits from the euro.
All this grandstanding is making ordinary people in Greece anxious and afraid.
"When elephants fight, it is the frogs that suffer," says 42-year-old sales assistant Niki Volioti, quoting a Greek proverb,
"I guess I am just tired of being the frog."