Greece is considering issuing more treasury bills as one of the options to cover a funding squeeze this month, a senior finance ministry official said yesterday.
Cash-strapped Greece is due to run out of cash within weeks if it does not get the next aid installment froam its international lenders. It also needs to repay a 3.2 billion euros (US$3.94 billion) bond maturing on Aug. 20.
The EU and the IMF have promised the country will be funded through this month, but the details of the funding have yet to be disclosed.
“One of the alternatives being considered is the higher T-bills,” the official said, speaking on condition of anonymity. “We are discussing the issue with our partners. A final decision has not been made.”
Greece has fallen behind targets agreed as conditions of its 130 billion euros bailout deal, mainly due to three months of political uncertainty as it struggled to form a government after two inconclusive elections in May and June.
Another option for seeing it through until crunch meetings with other EU leaders next month would be a bridge loan from its lenders, a finance ministry source said last month.
Greek Deputy Finance Minister Christos Staikouras sounded alarm bells on Tuesday on how Athens would pay public service wages, pensions and other every day expenses, telling state TV that Greece’s cash reserves are almost empty.
The daily Kathimerini said Greece’s PDMA debt agency has decided to issue 6 billion euros in T-bills this month, up from the 3 billion to 4 billion euros Athens auctions every month.
Monthly T-bill sales are Greece’s sole source of market funding, but Greece’s second EU/IMF bailout plan approved in March hopes to reduce the country’s reliance on T-bills.
Meanwhile, a growing number of Spain’s heavily indebted regions are rebelling against government orders to slash their deficits and could upset efforts to convince the EU and investors that the country can manage its finances and will not need an international financial bailout.
The debt burden of the 17 regional governments is a focus of market fears that strains on the national finances could drive Spain to seek a full bailout, on top of a 100 billion euros credit line agreed recently for its banking sector.
Spain’s central government has ordered the country’s 17 powerful regional governments to reduce their deficits to 1.5 percent of their GDP this year and 0.7 percent next year.
At Tuesday’s meeting, a majority of the regions approved an overall debt ceiling of 15.1 percent this year and 16 percent next year.
While Catalonia stayed away, Asturias and the Canary Islands voted against the limits and Andalusia’s treasury councilor Carmen Martinez Aguayo walked out without voting.
Two other regions, Asturias and the Canary Islands, voted against the proposal.
Curbing Spain’s deficit is seen as key to bringing down Spain’s borrowing costs. The interest rate for Spain’s benchmark 10-year bond remained perilously high yesterday at 6.6 percent.