ATHENS — Greece’s Prime Minister warned May 18 that the cash-strapped country is in a state of “financial strangulation” amid worries that Athens may only have a couple of weeks before going bankrupt.
Alexis Tsipras said Greece has tabled detailed proposals for a “viable” deal with creditors that will allow disbursement of a 7.2 billion euro ($8 billion) cash injection — the final payment due from the country’s 240 billion-euro bailout program.
For almost four months, Greece has been haggling with its creditors from the 19-country Eurozone and International Monetary Fund over what economic reforms it must make to secure the money.
Greece has relied on bailout funds for the last five years after its public finances spiraled out of control and it was locked out of international bond markets.
Over the past few weeks, it has survived — paying debts as well as day-to-day commitments on things like wages and pensions — by scraping together cash from reserve accounts.
However, it admits it is running out of options as further debt repayments come due next month. If no deal is agreed, the Greek government may be faced with a choice of what to pay, imposing capital controls and even leaving the euro.
“Although we are in a situation of financial strangulation, we have honored all our external obligations,” Tsipras said.
“The lack of liquidity is neither the choice nor the responsibility of the Greek government. It is a tough negotiating tactic of our partners, and I do not know whether everybody in Europe feels proud of it.”
Government spokesman Gabriel Sakellaridis said that to honor its debt obligations this summer, Greece needs more financial assistance. As a result, Sakellaridis expects a deal with creditors “by the end of May.”
Markets appear to be uncertain about how the latest episode in the Greek debt crisis will pan out. Though uncertainty over Greece caused the interest rate on the government’s two-year bonds — a gauge of default risk — surge about 3 percentage points on May 18 to above 24 percent, the Athens Stock Exchange closed 1.6 percent higher.
In the talks, Tsipras’ radical left-led government is proposing reform measures that might protect Greeks hammered by a six-year recession, but lenders say the proposals are too vague.
Athens has already pooled cash reserves from schools, hospitals and local government to fund the state’s debt payments.
And Sakellaridis confirmed the government this month used a reserve account with money in a currency unit used by the IMF to repay a loan to the Fund.
Sakellaridis also insisted Greece would not accept a one-off bank deposit levy to resolve the cash crisis — a similar measure had been used in eurozone member Cyprus two years ago.
In Spain, meanwhile, the country’s conservative economy minister said he was confident an agreement will be reached in the coming days.
Speaking at a business breakfast May 18, Luis de Guindos said an agreement was imperative given Greece’s financial difficulties. He said he was not aware of any alternative emergency plan should an accord not be reached.
Nicholas Paphitis in Athens and Ciaran Giles in Madrid contributed to this report
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