A cash buffer Greece’s ruling Radical Left SYRIZA-led coalition is setting aside when three international bailouts of 326 billion euros ($382.91 billion) end on Aug. 20 is the same as a precautionary credit it said wasn’t needed, a Eurozone official has said.
Prime Minister Alexis Tsipras and Finance Minister Euclid Tsakalotos had rejected calls by Bank of Greece Governor Yannis Stournaras for the credit line and have been trying to build a cash buffer from unused monies in a third rescue package of 86 billion euros ($101.01 billion) agreed in the summer of 2015 with the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM).
The source, not named by the business newspaper Naftemporiki, said Greece should not exhaust the buffer that’s expected to be some 20 billion euros ($23.49 billion) with political instability in Italy roiling the markets and driving up interest costs that could continue to rise when Greece returns to the markets.
The country will be at the mercy of the markets when the rescue packages from the Troika and the Washington, D.C.-based International Monetary Fund (IMF) end.
Two previous test bond sales of 3 billion euros ($3.51 billion) sold, but at interest rates more than three times higher than the bailouts. Tsipras said there wouldn’t be monitoring needed by the lenders but Tsakalotos said the scrutiny would be intensified – before taking his word back after he contradicted the Premier.
Stournaras, a former finance minister in a coalition led by the major opposition New Democracy when it was in power is a real bugaboo for Tsipras and SYRIZA as the bank governor has disputed government claims of a rosy recovery looming from a more than eight-year crisis, with more harsh austerity measures looming.
Stournaras said a credit line will help Greece successfully return to the markets, even if only one euro is needed, the business newspaper Naftemporiki said.
The Tsipras government said that would mean more tough conditions coming from the lenders while the Premier is simultaneously saying he’s bringing a recovery but that debt relief is needed because the loans can’t be repaid without restructuring.
In comments published by Japan’s Nikkei newspaper earlier in June, Stournaras also warned that a precautionary credit line is imperative in maintaining the ECB’s acceptance of Greek bonds as guarantees for refinancing of Greece’s systemic banks.