The European Stability Mechanism (ESM) approved the transfer of 555 million euros from the Financial Stability Fund (FSF) to the Greek State, indicating that Greece’s European partners are softening their stance towards Athens. These funds are from the dividend payments of the preferential shares that the banks received for the recapitalization in 2008.
While the ESM has agreed to do so last week, on Saturday it blocked the transfer, claiming that the FSF funds could not be used for any purpose other that what they were intended for. After long negotiations over the weekend and after the positive outcome of Monday’s Eurogroup, the ESM gave in.
While the 555 million euros will help the State cover some of its immediate needs, it will not sufficiently address the liquidity problems at hand. Next week the government will need about 2 billion euros to renew treasury bonds and to pay the IMF. The public debt management organization (ODDIH) has arranged a t-bill auction for Wednesday, however the bills that expire at the end of the week were purchased exclusively by Greek banks.
With foreign investors having abandoned the Greek market since December, due to the political uncertainty of the snap elections, the banks sold their t-bills on to private individuals. The ECB however will not allow banks to purchase additional titles, meaning that the banks may only renew what they already have in their portfolio.
The Greek government hopes that after Monday’s Eurogroup decisions the ECB will reexamine the Greek request to allow its banks to increase the amount of treasury bills they may hold, if not in Wednesday’s planned auction, then the next. In any case, the recent developments suggest that progress in talks with Greece’s creditors and partners will result in the ECB softening its stance towards Greece.
