IMF paid but how much money does Greece have left?

May 12, 2015

Greece's Finance Minister Varoufakis and Eurogroup chairman Dijsselbloem talk during an euro zone finance ministers meeting in Brussels

Greece made a 750 million euros repayment to the International Monetary Fund a day ahead of schedule on Monday but it is not clear precisely how much money Athens has left in its coffers.

Finance Minister Yanis Varoufakis said the liquidity situation was “terribly urgent” and a deal to release further funds was needed in the next couple of weeks.

Euro zone ministers meeting in Brussels appeared to make little headway with Athens on a cash-for-reforms deal to keep it afloat. After a fairly brief meeting, they welcomed incremental progress but said more work was needed to bridge the gaps on remaining issues.

German Finance Minister Wolfgang Schaeuble upped the ante, saying it could be helpful for the Greek government to hold a referendum on a deal with its creditors to stay in the euro zone since no progress was being made in negotiations and it could help to know whether the Greek people want to stay in the euro zone and at what cost.

As things stand, Athens is refusing to cut its bloated pensions system or make hiring and firing easier to meet their lenders’ demands. It wants the European Central Bank to give it leeway to sell more short-term debt to Greek banks to stay afloat in the short-term.

The ECB meets on Wednesday but it doesn’t look like the Eurogroup’s lukewarm response gives any prospect of it cutting Athens more slack. Prime Minister Alexis Tsipras will hold a cabinet meeting today to discuss next steps.

All 28 EU finance ministers meet in Brussels today. They will be briefed on the progress towards the 300 billion euro “Juncker” investment plan for Europe  and will discuss budget issues and country-specific recommendations with France, presumably, in the spotlight.

Ahead of a glut of first quarter euro zone GDP data on Wednesday, the Bank of France has just forecast first quarter growth of 0.3 percent in the second quarter.

The ministers will tell Turkey that its “conflicting” monetary policy is failing to lower inflation and a tighter stance is needed – a rebuke for President Tayyip Erdogan’s demands for lower interest rates.

According to a draft statement prepared for the European Union’s yearly economy review of Turkey’s EU candidacy, the finance ministers will express their displeasure at Erdogan’s pressure on the central bank, which has  unnerved investors.

One interesting angle will be to watch British finance minister George Osborne, who will lead the UK’s efforts to renegotiate its ties with the EU. Doubtless his colleagues will want to hear what he has in mind and what it will take to placate eurosceptics in his Conservative party before an in-out referendum in 2017.

Britain’s European partners sound willing to help, up to a point, but an insistence on the need for EU treaty change has virtually no chance of coming to pass in the next two years – the rest of the bloc is focused on Greece now, Spanish, Portuguese and Polish elections are due later in the year and French and German elections in 2017 mean there will be no appetite for it in Paris and Berlin.

On freeing up business to do what it does best, boosting global trade and curbing the EU’s ability to legislate in every corner of life, David Cameron will find considerable support.

But he has already had to ditch plans to restrict free movement of labour and a meaningful repatriation of powers of the magnitude many of his followers want looks extremely difficult to achieve, even if his government gets better at winning allies than it has been.

Cameron’s new cabinet holds its first meeting today. The government has a long list of uncosted manifesto tax and spending pledges which it probably thought it wouldn’t get a chance to deliver in another coalition. It will have to deliver them now it is ruling alone.

It would be interesting to know what the Treasury thinks about a promise to legislate so it will be impossible to raise personal tax rates for the next five years regardless of circumstances.

The British Retail Consortium reported overnight the biggest annual sales fall in four years last month, hurt by the early date of Easter holidays, though the industry body said underlying growth was robust.

Russia’s Vladimir Putin will meet U.S. Secretary of State John Kerry in the Russian Black Sea resort of Sochi to discuss Ukraine, Syria and Iran. Hopes of any meeting of minds on Ukraine are slim.

The IMF starts a review of Ukraine’s progress in meeting conditions of its four-year $17.5 billion rescue programme. The review is likely to take weeks.

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