Greece demands cash from local government as default fears grow

(The Guardian) The Greek government has issued a decree forcing public sector bodies to transfer idle cash reserves to the central bank in a sign of how severe the country’s cash crunch has become.

The order came as the country’s finance minister, Yanis Varoufakis, issued a stark warning to eurozone neighbours that they were playing with fire as Athens edges closer to a debt default.

Fears of a Greek exit from the eurozone have increased as signs grow that the country is on the brink of bankruptcy. The state is scrambling to find funds to pay almost €2bn (£1.4bn) in wages and pensions and almost €1bn to the International Monetary Fund in the coming weeks.

The language in Monday’s presidential decree provides an insight into just how tight finances have become for Greece’s recently elected anti-austerity government, led by Alexis Tsipras’s Syriza.

“Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece,” the news service Bloomberg quoted the decree on the government gazette website as saying.

The “regulation is submitted due to extremely urgent and unforeseen needs”, it said.

Greece owes money to the IMF, the European Central Bank (ECB) and the European commission following two bailouts totalling €240bn in 2010 and 2012.

Athens is waiting for the final €7.2bn payment under the most recent bailout package, but the money has been held up after the country’s leftwing government scrapped previous commitments to privatise state assets and cut welfare provision.

Economists have predicted that without the rescue funds, Greece is unlikely to make the salary and pensions payments and settle its dues with the IMF. They say Greece is edging closer to a default on its debt obligations that could precipitate the country’s exit from the eurozone.