Greece looks to social security funds to plug debt bills

[ATHENS] Greece's government confirmed on Thursday that it may raid the country's pensions and social security system to raise money to meet its huge debt repayments.

With Athens having to find 6 billion euros (S$8.8 billion) in the next two weeks alone to pay its creditors, and its bailout frozen, the finance ministry said it is to ask parliament to allow it to raise money from the reserves of state bodies.

It insisted that it was not forcing state bodies and funds to transfer their reserves to the Bank of Greece, but that the government would guarantee them "for any capital losses" if they did so.

The statement made clear that the government was planning to enter the so-called repo short-term loan market after it tried in vain to persuade the European Central Bank to allow it more wriggle room.

Finance Minister Yanis Varoufakis had earlier on Thursday admitted that Greece had "a relatively small cashflow problem".

"Greece was always going to have a difficult March for 2015 - always," he told France24 television as he met OECD officials in Paris.

"Our repayments are lumpy. They are not smooth." Although the ECB made a gesture on Thursday by raising the level of its emergency loan assistance to Greek banks by 600 million euros to 69.4 billion euros, it was not enough to plug the hole in the government's finances.

Athens' only real way of raising cash of late has been Greek banks buying its short-term treasury bills, earning 1.138 billion euros from the latest sale on Wednesday.

'SCRAPING THE BARREL'

But despite strong pressure from the radical new Syriza government, the ECB has only raised the bar on loans its can take out by small sums insufficient to meet Athens' midterm needs.

The new measures will be tabled as amendments to a flagship law tackling the "humanitarian crisis" in the country caused by austerity, Syriza's first major piece of legislation which they hope to push through parliament later this month.

Professor Michael Arghyrou, of the Cardiff Business School, said such moves showed what a desperate situation Greece is in. "It's scraping the barrel," he said.

He claimed that if the government need to raid those funds now, then "it doesn't look like they will be able to meet the (debt) payments in June and July", when some of their largest ones fall due.

Dr Theodore Pelagidis, professor of economics at the University of Piraeus, questioned whether the government had a right to the money.

He said he has been hearing reports for some time of hospitals, universities and other semi-state institutions with cash reserves being contacted by officials.

"Some keep several million euros on deposit for various reasons and the government clearly wants access to those funds. I have talked to a hospital director who has been asked how much he has in his reserves," he told AFP last week.

"Pensions and agricultural subsidies are also apparently being tapped. I am not sure this is the best way to pay your bills. The farm subsidies are European taxpayers' money. Has the government really the right to take that money, even temporarily?"

AFP