Greek Government Faces Cash Crunch Next Week

Due to my odd hours, I am seeing this report on ekathimerini a bit late. Via Rob Parenteau:

According to figures released yesterday by the Bank of Greece, in January the net cash result of the central administration posted a deficit of 217 million euros, against a surplus of 603 million in January 2014. Budget revenues reached 3.1 billion euros, against 4.4 billion in January 2014, while expenditure dropped to 3.2 billion from 3.6 billion last year.

Given these figures, the Finance Ministry estimates that cash reserves will run out next Tuesday. It has the option, however, of using the reserves of general government entities kept in commercial banks in order to cover short-term needs next week. However, the problem that cannot be addressed as things stand concerns needs for the first week of March.

Unless something changes drastically to the country’s funding, Greece will not be able to fulfill all of its March obligations.

As Parenteau points out, this would be the juncture for Greece to resort to tax anticipation notes to extend its financial runway.

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  1. Dan Allen

    Not so fast on the TANs.

    The previous gov’t was in even worse shape in 2012.

    It responded by… not paying money out to hospitals and utilities.

    Not paying employees.

    It had to, I suppose, and the cash crunch back then was much much worse. The previous gov’t actually finished paying off its arrears last year.

    I suppose the new gov’t can stall until it figures out what to do about tax revenue.

    1. davidgmills

      I disagree. See my post below. Tax coupons are much better than not being paid. They will work as sovereign currency.

  2. Matt Pappalardo

    “Our fate, I tell you, stands on a razor’s edge: life or death for Achaea, gruesome death at that.”

    1. Gerard Pierce

      “More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.” — Woody Allen

  3. NOTaREALmerican

    I’m tinkin’ dees Greeks need annudder loan. Wudda ya tink? Should we give em annudder loan? I’m tinkin’ we should.

  4. Jonf

    If I understand this those TAN thingies are a from of fiscal policy since they allow you to run a deficit without bonds. If you could do it, there is no clear limit on how much one could finance. No?

  5. Carlos Fandango

    Looking at those numbers a 1.5% surplus looks absurd, let alone 4.5%. Seriously, is everyone sitting around smoking something. Bill Mitchell is right…. Greece needs to run a 10% deficit to get any traction on their economy.

    Print the damn money….. Fools!

  6. readerOfTeaLeaves

    Tangential to this post —

    At the Guardian, a very thought-provoking piece by Varoufakis from a lecture he gave in 2013. Long form: How I Became an Erratic Marxist.

    …Marx’s brilliant insight into the essence of capitalist crises was precisely this: the greater capitalism’s success in turning labour into a commodity the less the value of each unit of output it generates, the lower the profit rate and, ultimately, the nearer the next recession of the economy as a system. The portrayal of human freedom as an economic category is unique in Marx, making possible a distinctively dramatic and analytically astute interpretation of capitalism’s propensity to snatch recession, even depression, from the jaws of growth….

    His analysis that the left has ceded ‘freedom’ to the neoliberals, which has been a fatal error, is among many very insightful observations in this piece.

    As I read this piece, Varoufakis sees the inhumanity of current financialized capitalism. But he also recognizes that simply to object to it leaves entire populations vulnerable to the rise of neo-Nazism, and other far right authoritarian forces.

    1. Santi

      You can watch him deliver the conference from which he later extracted this text here: including more than half an hour Q&A, where he talks about digital (TAN-like) currencies and other matters very current.

      BTW, according to The Guardian The ELA has been extended by 3.3B€ giving a bit of breathing space to Athens and signaling that the ECB is not blowing the Greek banking system, and the Greek Government will present (i guess Yet Another) proposal for an extension of the loan tomorrow. Yannis Palaiologos says at the WSJ it is “an offer Germany can’t refuse.” Let’s see…

      1. Foy

        Great link Santi, really enjoyed watching it and hearing him talk, especially the Q&A and also his “final confession” at the end of his talk which probably goes to the heart of how even the best get ‘captured’ by the TPTB…. re his ‘final confession’, I hope he only flies on big planes these days though…wouldn’t be getting on any small ones at the moment if I was him…

    2. FederalismForever

      “the greater capitalism’s success in turning labour into a commodity the less the value of each unit of output it generates, the lower the profit rate and, ultimately, the nearer the next recession of the economy as a system.”

      What does this even mean? Does he conceive the relation between commodified labour and output value as some sort of zero sum trade-off? Oy! Done right, the relation can be positive sum.

      1. Kyle

        Simple enough. Labor IS the market. Profit is the mere siphoning off of a portion of the productivity of labor, reducing labor’s ability to provide demand to commerce. The more labor is pauperized the more the market is pauperized. Commodification apprehends a reduction in cost, i.e., the pauperization of labor.

  7. Hannibal

    It’s all just words and digits on paper folks, left brain social constructs, a place holder everybody believes in,..for now! And since one can’t get blood out of a stone, Greece should default 100%, leave the EU, drop the Euro and adapt the U$D for it’s domestic currency, (plenty of them floating around for immediate use) while prepping for a new Drachma, promote their number one industry: Tourism, and move on.
    Trees will still grow tall and the sun will still shine.

  8. Synoia

    adapt the U$D for it’s domestic currency

    And from where would they acquire the U$D?

    Better they create some Euros. I believe the Irish have that power. Jut credit themselves $500 Billion Euros, and retire their debt.

    1. am

      Zimbabwe gets them from somewhere. Greece if they leave the Euro would be better going with numerous tradeable currencies as valid mediums of exchange. It sure keeps inflation down although the national government will not have control of these currencies for monetary policy. Stick with that set up for 5 years and see about the new drachma after that. Some countries in the world should not have their own currency and Greece is one of these countries.

      1. Carlos Fandango

        Greece doesn’t have it’s own currency now… It’s a user of the Euro, with no say in fiscal or monetary policy. That’s the problem. Using a basket of other currencies will only exacerbate the problems they already have.

        If Greece becomes an unofficial user of the Euro or any other currency, their banks will go bankrupt overnight without access to ECB liquidity. They also lose the option to run a deficit and influence the exchange rate, it’s not a good position to be in.

  9. Cugel

    They’re not going to leave the Euro and print Drachmas! Varoufakis has already explained at great length why that is not an option. However, there’s a big difference between jumping off a bridge and being pushed. The Germans may push them off the precipice, but they’re not going to voluntarily leap to their death on the rocks below.

  10. I.G.I.

    Although not directly relevant to the thread, but there is a nice interview with Tsipras for Stern. As usual for such interviews there is nothing sensationally new. For the non Greeks, however, it may explain some of the Tsipras allure as a politician and leader – the ability to present complex issues as simple tales, and to sound always resolute and upbeat.

  11. davidgmills

    Tax anticipation notes sounds eerily similar to bills of credit which the US Constitution says States are prohibited from issuing. The Constitution is silent as to whether the Federal Government can issue bills of credit, so the Supreme Court held in the Lincoln greenback cases that the Federal Government could issue them since the Federal Government was not expressly forbidden from issuing them like the states were. It also held that being able to issue them was part of the federal government’s war powers.

    Print tax coupons and use them as money. Saved the nation when Lincoln did it, as he was able to pay soldiers and suppliers.

    So good for Greece. I hope they print these tax coupons and the public uses them as money. And I hope others follow suit. How can you be a sovereign nation if you can’t print debt-free money in times of crisis?

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