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Wednesday, March 25, 2015 5:30 AM

One Minute to Midnight: Athens Raids Public Health Coffers in Hunt for Cash; Brussels Threatens Capital Controls

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Eurozone watchers have said 11th hour so many times that no one believes it any more. To place new emphasis on the plight of Greece it's now allegedly 1 minute to midnight.

Given that Greek funds were supposed to last until April 30, there's plenty of time for 30 seconds to midnight, 20 seconds to midnight, then a countdown to Cinderella hour when Greece may finally turn into a pumpkin.

Brussels Threatens Capital Controls

Meanwhile, with a countdown underway, please consider Athens Raids Public Health Coffers in Hunt for Cash.

Greece’s government has raided the coffers of its public health service and the Athens metro as it widens a hunt for funds to keep itself afloat and service debts.

Athens faces a €1.7bn bill for wages and pensions at the end of the month and then a €450m loan payment to the International Monetary Fund on April 9. Greek government and eurozone officials believe Athens does not have funds to cover both.

In another constraint on Greece’s ability to raise cash, the European Central Bank decided to impose stricter curbs on the issuance of short-term government debt.

EU officials expressed hope that a marathon Monday night meeting between Alexis Tsipras, the Greek prime minister, and his German counterpart, chancellor Angela Merkel, would spark long-stalled talks over economic reforms Greece must implement to unlock €7.2bn in frozen bailout aid.

In the absence of progress, some EU officials were accelerating their preparations in case Athens runs out of cash before it agrees a reform programme. In Brussels, European Commission officials have begun looking again at EU law governing capital controls in case the growing uncertainty, or a non-payment to the IMF, spurs a renewed run on bank deposits.

In Frankfurt, the ECB informed Greece’s biggest banks that it was making legally binding the ceiling it imposed last month on their holdings of short-term Treasury bills.

Such a move will limit the Eurosystem’s exposure to the Greek government should it fail to pay its debts. But it will also close off another source of financing on which Athens had been relying.

Greek banks hold about €11bn in Greek T-bills, and Athens must roll over two T-bills totalling €2.4bn in mid-April.

“The Greeks are one minute away from midnight,” said Mujtaba Rahman, head of European analysis at the Eurasia Group consultancy. “The government is at the edge of the precipice and may well go over.

In a sign that the cash crunch has become more desperate, officials at Greece’s state healthcare service, were asked on Tuesday to hand over a €50m reserve for paying arrears owed to medical workers.

Earlier this month about €150m of budget funding for hospital supplies was unexpectedly withheld, according to health ministry officials.

The government has so far rounded up more than €600m of cash held by state-owned corporations, including contributions from the Athens metro company, the state electricity supplier, PPC, and the Athens water utility.

About €300m in EU subsidies due to farmers has been diverted to cover salary payments to civil servants, according to people briefed on how the cash crunch is being handled.

Some officials believe a failure to pay the IMF in April would not be catastrophic: under fund rules, a non-payment is not immediately considered a default, though it would prevent Greece from accessing any IMF bailout funding. Half of the €7.2bn tranche Athens is seeking comes from the fund.

A failure to pay either of the T-bills — one is due on April 14, the next on April 17 — would probably bring wider upheaval since they could trigger clauses in other debt obligations that would make them due immediately.

The ECB ceiling could make repayment of the April 14 bill particularly challenging. Greek banks have been the primary buyers of such debt and have essentially rolled over their existing holdings during recent T-bill auctions. But at least 20 per cent of the April 14 bill is held by investors outside Greece who are unlikely to roll over their holdings and Greek banks are now barred from buying up the difference.
Seven Seconds to Midnight?

With all these funds being diverted, I fail to see how Greece can possibly make it to April 30.

Thus I offer my own number. I believe it's seven seconds to midnight. However, we have seen the clock stop on many occasions before, stuck on the 11th hour for weeks on end.

It could easily stop at one second to midnight for a week or so.

With that, it's time for a musical tribute.

Link if video does not play: Does Anybody Really Knows What Time It Is? - Chicago

Mike "Mish" Shedlock

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