That’s the assessment of economists at Bloomberg Intelligence, who concluded that Greek lenders have enough collateral to keep emergency funds flowing from the European Central Bank for another eight weeks, so long as policy makers don’t tighten the terms of liquidity. Tax revenue may be enough to keep the government afloat for about the same amount of time, economists Jamie Murray and David Powell said in a research note. The 3.5 billion-euro ($3.9 billion) payment due to the European Central Bank on July 20 may be the end of the road.
“That’s huge,” Powell said in a telephone interview. “They might limp through June, but July looks very difficult.”
The big gray bar below shows just how high the ECB payment in July is relative to current IMF obligations.
Nobody outside of Athens knows exactly how much cash the Greek government has left, but the increasingly desperate scramble to make its payments suggests it’s not a lot. With European officials doubting Greek assertions that an aid deal is imminent, the country’s fate in the days and weeks ahead will depend to a large extent on how much revenue the government can raise from the domestic economy.
Tax revenue increased in March and April, compared with government income in 2014, boosting Greece’s chances of making payments of about 1.5 billion euros to the International Monetary Fund in June, according to Bloomberg Intelligence. The Treasury will also get about 3.8 billion euros in extra revenue due when Greeks pay their income tax in July. This year’s monthly revenue, in orange, vs last year looks like this.
While receipts are trending higher, the government has managed to restrain spending relative to last year. The trend is obvious here.
Economists at Royal Bank of Scotland Plc, ABN Amro and JPMorgan Chase & Co. suggest the crunch could come even sooner. If the ECB increases the haircut on Greek collateral to last year’s levels over too-slow negotiations, that would leave the banking system with just four weeks of funding, a European official said this week.
“There are soft deadlines that are just pulled out of the sky and there are bond maturities,” Powell said. “They are a lot more difficult to get around or extend.”
Key dates in the Greek saga
- June 5: 300 million-euro payment to IMF
- June 12: Refinancing of 3.6 billion euros of Greek T-bills and 340 million euros due to IMF
- June 16: 566 million euros due to IMF
- June 18: Euro-region finance ministers meet in Luxembourg
- June 19: Refinancing of 1.6 billion euros of Greek T-bills, 340 million euros due to the IMF, 85 million-euro interest payment to ECB
- June 25-26: EU leaders meet in Brussels
