Analysis: Greece runs out of cash, but further assistance is unlikely

Although last week the Greek government secured an extension of its bailout program, this doesn’t give it access to cash from the eurozone and the International Monetary Fund. The eurozone is unlikely to give Athens a break, even if it is running out of cash.

In order to receive that money, Athens will need to agree on a revised program of austerity measures and economic overhauls with its creditors, and pass them into law.

Agreeing and passing them into law is likely to take months of difficult negotiations—but Greece doesn’t have that kind of time. It must repay the IMF €1.5 billion ($1.7 billion) in March alone, with the first installment of nearly €300 million due on Friday.

Athens could face trouble paying its bills before the end of March, as it is between dwindling tax receipts and requirements to repay debt soon to the IMF.

That would lead the new government to choose between: raid existing government cash reserves and further delay payment to its suppliers, a tactic repeatedly used by previous Greek governments that has further strangled the economy over the last five years.

European creditors are highly unlikely to give Athens a break. Nor is Athens likely to be granted its preferred option: an increase in the €15 billion cap on the amount of short-term Greek government debt that Greek banks are allowed to buy. The ECB, which now regulates banks across the eurozone, doesn’t want to let the banks load up further on the risky debt of its government, The Wall Street Journal reports.

This leaves Athens with very few options.

According to James Nixon, chief economist at Oxford Economics, the government may have €2 billion in cash left over from last year, a consultancy based in the U.K. Another €2 billion may be left in various government funds, such as Greece’s beleaguered social-security funds, and the government could find another €1 billion by delaying payment to suppliers, Mr. Nixon said.

A senior eurozone official supposes the Greek government’s existing cash reserves might last until May, provided its tax receipts don’t continue to collapse. Eurozone officials have expressed exasperation with promises from the new government to allow people to pay late taxes in up to 100 installments.

The Greek authorities have delayed payments to suppliers and refunds owed to taxpayers throughout the crisis, while it awaited loan disbursements from its creditors, who were reluctant to give more money to Athens. The economy has been heavily hit by these delays, which have extensive knock-on effects: Suppliers that aren’t paid by the government, in turn, struggle to pay their suppliers and employees.

In 2012 that problem became particularly sharp, as Greece went for months without a new loan disbursement from the eurozone and the IMF.

This time, the negotiations to get money flowing again to Athens are expected to be much harder.