Greek Finance Minister Yanis Varoufakis said he’s counting on the European Central Bank to help the country avert default when it runs out of money next month, while bank deposits are also starting to flow back.
The ECB owes Greece almost 2 billion euros ($2.3 billion) from the return of profits made under a program to buy euro-region bonds to support the market, Varoufakis said in an interview with Bloomberg Television in Athens. The Greek government must make four payments to the International Monetary Fund in March, to service its bailout loans.
The Frankfurt-based ECB “could hand over this money to the IMF as partial repayment,” he said on Wednesday. “I’m giving you examples, nothing has been decided. This is money we are owed. This is our money, an overpayment to the ECB.”
ECB President Mario Draghi told the European Parliament on Wednesday it’s a popular misconception that it’s up to his institution to return any profit from the Securities Markets Program. He said governments are in control of the funds.
“You still believe that the SMP profits are owned by the ECB and are kept there? That’s not so,” he said. “The SMP profit, like any other profit, has been distributed to all the central-bank members of the ECB. And the central-bank members of the ECB have transferred their profits to their national budgets.”
Profit Agreement
Euro-area governments agreed in November 2012 to transfer to Greece an amount equal to any profit on SMP holdings of the country’s debt as long as it complies with the conditions of its surveillance program. Greece’s bailout review, which is the yardstick by which compliance is measured, remains stalled since last September and the scheduled SMP profit returns tranche for 2014 hasn’t been disbursed.
The region’s finance ministers on Tuesday approved a package of Greek reform commitments, which include improved tax collection and tackling corruption, following a recommendation from creditor institutions. Greece will have to specify the measures for fulfilling these commitments and then implement them by June 30, in order to unlock the next bailout tranche, which may also include SMP profit returns.
The Feb. 24 deal to extend the availability of bailout funds calmed fears about Greece’s place in the euro area. On the same day, about 700 million euros returned to Greek bank accounts, Varoufakis said.
Starting Point
“There was a deposit flight back into the Greek banking sector,” said Varoufakis, 53. “It’s a question of direction. Once you turn the tide, you hope.”
Greek deposits fell in January to 148 billion euros from 164 billion euros in November. The 12 billion-euro monthly drop in January was the steepest ever recorded, and the total stock of deposits in the Greek banking system slid to the lowest level since 2005.
The institutions representing Greece’s creditors — the European Commission, the ECB and IMF — warned that the package of reforms were just a starting point, and that the country needs to stick with its commitments.
The measures, which also include maintaining state-asset sales, are a condition for extending the availability of bailout funds for another four months based on an initial agreement on Feb. 20. The current program, which has been keeping Europe’s most indebted state afloat since 2010, was scheduled to expire at the end of this month.
‘Pretty Confident’
The next hurdle will come in April when the institutions and finance ministers review progress. That will come after the government has to service about 2.2 billion euros of debt, including repaying loans to the IMF. The figure doesn’t include rolling over Treasury bills.
“I’m pretty confident we won’t have a cash-flow problem, because we all struggled very hard through long hours of discussions with our partners, with institutions, to come to this stage,” Varoufakis said. “I find it very hard to imagine that Europe and the IMF will allow us to trip over what is a relatively small cash problem.”
Varoufakis, an economics professor at the University of Athens, spoke from his office on the sixth floor in the finance ministry, which lies opposite the Greek Parliament in Syntagma square, scene of demonstrations during the economic crisis. In the elections of Jan. 25, he got more votes than any other candidate in any Greek district.
Lagarde Criticism
He said that criticism of the Greek paperwork listing its commitments to change the economy was unfair.
The list of commitments was “not very specific” and doesn’t convey “clear assurances” that reforms will happen, IMF Managing Director Christine Lagarde wrote in a letter to the head of the euro region’s group of finance ministers.
“We were asked to produce a three-page document and we produced a five-page document over a weekend,” Varoufakis said. “Nobody ever expects in their right mind that can come complete with financial analysis, fiscal analysis, quantitative targets and monitoring and measuring and performance indicators.”
The ASE stock index rose almost 10 percent after the agreement with finance ministers. Greek stocks fell today, with the benchmark index losing 2.7 percent at 4:20 p.m. Athens time. Yields on three-year bonds rose 52 basis points to 13.79 percent.
The 10-year bond was at 9.2 percent. When asked if the price for Greek risk is right, Varoufakis said “probably.” For the moment, Greek debt is not visibly sustainable, he said.
“The moment there is an announcement of a sensible deal on investment, primary surpluses and debt restructuring, you will see that those yields will sink to 1 percent, in line with what’s going on in other European countries,” Varoufakis said.