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Greece taps public sector cash to help cover March needs

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Greece taps public sector cash to help cover March needs
Greece is tapping into the cash reserves of pension funds and public sector entities through repo transactions as it scrambles to cover its funding needs this month, debt officials told Reuters on Tuesday.Shut out of debt markets and with aid from lenders frozen, Athens is in danger of running out of cash in the coming weeks as it faces a 1.5 billion euro loan repayment to the International Monetary Fund this month.The government has sought to calm fears and says it will be able to make the IMF payment and others, but not said how.At least part of the states cash needs for the month will be met by repo transactions in which pension funds and other state entities sitting on cash lend the money to the countrys debt agency through a short-term repurchase agreement for up to 15 days, debt agency officials told Reuters.However, one government official said they could not be used to repay the IMF unless Athens was able to repay the state entities the cash it borrowed from them.Debt officials sought to play the repos as advantageous for both sides, arguing that the funds get a better return on their cash than what is available in the interbank market.”It is not something new, its a tactic that started more than a year ago and is a win-win solution. Its a proposal, we are not twisting anyones arm,” one official said.In such repo transactions, a pension fund or government entity parks cash it does not immediately need at an account at the Bank of Greece, which becomes the counterparty in the deal with the debt agency.The money is lent to the debt agency for one to 15 days against collateral – mostly Greek treasury paper held in its portfolio – and is paid back with interest at expiry.The lender can always opt to roll over the repurchase agreement and continue to earn a higher return than what is available in the interbank market.One source familiar with the matter has previously said Athens could raise up to 3 billion euros through such repos, but that it was not clear how much of that had already been used up by the government.”There is a sum that has already been raised this way,” the debt official said without disclosing specific numbers.Athens – which has monthly needs of about 4.5 billion euros including a wage and pension bill of 1.5 billion euros – is running out of options to fund itself despite striking a deal with the euro zone to extend its bailout by four months.Faced with a steep fall in revenues, it is expected to run out of cash by the end of March, possibly sooner, though the government is trying to assure creditors it will not default.”We are confident that the repayments will be made in full, particularly to the IMF, and there will be liquidity to get us through the end of the four-month period,” Finance Minister Yanis Varoufakis said during a late-night talk show on Greek TV on Monday. “March is sorted.” [Reuters]
[…]

Greece sends EU reform list, more hurdles before early cash

By Renee Maltezou and Jan Strupczewski

ATHENS/BRUSSELS (Reuters) – Greece sent its euro zone partners an augmented list of proposed reforms on Friday but EU officials said several more steps were required before any release of aid funds to a country that Prime Minister Alexis Tsipras says has a noose around its neck.

Struggling to scrape together cash and avoid possible default, Athens made a 310 million euro partial loan repayment to the International Monetary Fund, while Tsipras pleaded to be allowed to issue more short-term debt to plug a funding gap.

Greece is running out of options to fund itself despite striking a deal with the euro zone in February to extend its EU/IMF bailout by four months.

European Central Bank President Mario Draghi has refused to raise a limit on Athens’ issuance of three-month treasury bills which Greek banks buy with emergency central bank funds. He said on Thursday the EU treaty prohibited indirect monetary financing of governments.

“The ECB has still got a rope around our neck,” the leftist Greek premier complained in an interview with German magazine Der Spiegel released on Friday. If the ECB continued to object, it would be assuming a grave responsibility, he said.

“Then it would be back to the thriller we saw before Feb. 20,” Tsipras said, referring to the date when Greece agreed a four-month extension of its bailout with euro zone partners after market jitters ignited by political uncertainty.

In a letter to the 19-nation Eurogroup, Finance Minister Yanis Varoufakis outlined plans to fight tax evasion, activate a “fiscal council” to generate budget savings and update licensing of gaming and lotteries to boost state revenues, a Greek official said.

However, the expanded list of reforms arrived too late for deputy finance ministers and European Commission experts who met on Thursday to scrutinise it before a regular meeting of finance ministers of the currency area next Monday.

“Whatever proposals emerge (from Varoufakis), they can’t be seen in isolation,” said a senior EU official, who declined to be named due to the sensitive nature of the talks. “They have to been seen in the overall context of all policy measures … There is no connection with the disbursements.”

One key condition for Greece to receive any more euro zone money is for Athens to reach an agreement with its three international creditors – the euro zone, the ECB and the IMF – on the implementation of reforms agreed by the previous government. Such talks have not even begun yet.

“FEWER WORDS, MORE DEEDS”

Greece must repay a total of 1.5 billion euros to the IMF over the next two weeks against a backdrop of dwindling tax revenues, frozen bailout funds and economic stagnation. Three other instalments are due on March 13, 16 and 20.

In an apparent recognition that outspoken public statements that the country is broke and will not repay its debts and attacks on other euro zone governments have damaged Greece’s position, Tsipras said he had asked his cabinet – including Varoufakis – for “fewer words and more deeds”.

Many EU partners have been exasperated by a torrent of rhetoric from Athens since Tsipras’ hard-left Syriza party won a parliamentary election on Jan. 25 and formed a coalition with the right-wing nationalist Independent Greeks party.

Greece has monthly needs of about 4.5 billion euros, including a wage and pension bill of 1.5 billion euros. It is not due to receive any financial aid until it completes a review by lenders of final reforms required under its bailout.

Greek central bank chief Yannis Stournaras said after talks with Tsipras on Friday that Greek banks were sufficiently capitalised and faced no problem with deposit outflows.

“There is full support for Greek banks (from the ECB), there is absolutely no danger,” he said after the meeting. But he added Monday’s euro zone meeting had to be “successful”.

Athens has begun tapping cash held by pension funds and other entities to avoid running out of funds as early as this month. Various short-term options it has suggested to overcome the cash crunch have been blocked by euro zone lenders to pressure the Tsipras government into enacting reforms.

A German Finance Ministry spokesman said on Friday that Berlin saw no basis for Greece to get the next 1.5 billion euro tranche of its bailout immediately, but if Athens implemented its reforms sooner than expected, it could get paid early.

“If the Greek programme is in a position to work out its list of reforms in detail earlier than the end of April and the troika agrees to it and if this programme is, accordingly, implemented earlier, it would of course be possible to make a payment earlier,” spokesman Martin Jaeger told reporters.

(Additional reporting by Stephen Brown in Berlin, Lefteris Papadimas and George Georgiopoulos in Athens and Robin Emmott in Brussels; Writing by Paul Taylor; Editing by Gareth Jones)

Politics & GovernmentBudget, Tax & Economy […]

Cash-strapped Greece repays first part of IMF loan due in March

By George Georgiopoulos and Lefteris Papadimas

ATHENS (Reuters) – Greece repaid on Friday the first 310 million euro instalment of a loan from the International Monetary Fund that falls due this month as it scrambles to cover its funding needs amid a cash crunch.

Prime Minister Alexis Tsipras’ newly elected government must pay a total of 1.5 billion euros to the IMF this month over two weeks starting on Friday against a backdrop of fast-depleting cash coffers.

“The payment of 310 million euros has been made, with a Friday value date,” a government official told Reuters, requesting anonymity.

Athens has to pay three other instalments, on March 13, 16 and 20 as part of repayments due to the IMF this month.

Tsipras’ government has said it will make the payments but there has been growing uncertainty over Greece’s cash position as it faces a steep fall in tax revenues while aid from EU/IMF lenders remains on hold until Athens completes promised reforms.

Athens sent an updated list of reforms on Friday to Brussels ahead of a meeting of euro zone finance ministers on Monday, a Greek government official said, adding that the list expanded on an earlier set of proposals.

The list includes measures to fight tax evasion and red tape and facilitate repayment of tax and pension fund arrears owed by millions of Greeks, the official said. It also proposes a “fiscal council” to generate savings for the state.

Athens is running out of options to fund itself despite striking a deal with the euro zone in February to extend its EU/IMF bailout by four months.

Greece has monthly needs of about 4.5 billion euros, including a wage and pension bill of 1.5 billion euros. It is not due to receive any financial aid until it completes a review by lenders of final reforms required under its bailout.

Greece’s central bank chief, Yannis Stournaras, said after talks with Tsipras on Friday that Greek banks were sufficiently capitalised and faced no problem with deposit outflows.

“There is full support for Greek banks (from the ECB), there is absolutely no danger,” he said after the meeting. But he added Monday’s euro zone meeting had to be “successful”.

The ECB will resume normal lending to Greek banks only when it sees Athens is complying with its bailout programme and is on track to receive a favourable review, ECB President Mario Draghi said on Thursday.

Athens has begun tapping cash held by pension funds and other entities to avoid running out of funds as early as this month. Various short-term options it has suggested to overcome the cash crunch have been blocked by euro zone lenders.

Tsipras’ leftist Syriza was elected on Jan. 25 on a promise to end the belt-tightening that came with the EU/IMF bailouts.

(Additional reporting by Renee Maltezou; Editing by Gareth Jones)

Politics & GovernmentBudget, Tax & EconomyInternational Monetary Fund […]

Greece requests euro zone loan extension, offers big concessions

* Athens uses vital EU wording to request extension

* Euro zone officials to discuss whether letter meets terms

* Greek bailout deal due to expire on Feb. 28

* State faces running out of cash by late March – source

* ECB raises emergency funding for Greek banks only modestly (Adds Dijsselbloem confirms euro zone ministers to meet Friday)

By Renee Maltezou and Jan Strupczewski

ATHENS/BRUSSELS, Feb 19 (Reuters) – Greece formally requested a six-month extension to its euro zone loan agreement on Thursday, offering major concessions as it raced to avoid running out of cash within weeks and overcome resistance from sceptical partners led by Germany.

With its EU/IMF bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late March.

Euro zone finance ministers will meet on Friday afternoon in Brussels to consider the request, the chairman of their Eurogroup, Jeroen Dijsselbloem, said in a tweet.

That raised hopes of a deal to avert possible bankruptcy and a Greek exit from the 19-nation currency area.

A government official told Reuters that Athens had asked for an extension to its “Master Financial Assistance Facility Agreement” with the euro zone. However, he insisted the government was proposing different terms from its current bailout obligations.

Greece had committed to maintain fiscal balance during the interim period, take immediate reforms to fight tax evasion and corruption, and measures to deal with what Athens calls its “humanitarian crisis” and kick-start economic growth, he said.

In the document seen by Reuters, Greece pledged to meet its financial obligations to all creditors, recognise the existing EU/IMF programme as the legally binding framework and refrain from unilateral action that would undermine the fiscal targets.

Crucially, it accepted that the extension would be monitored by the European Commission, European Central Bank and International Monetary Fund, a climbdown by Tsipras who had vowed to end cooperation with “troika” inspectors accused of inflicting deep economic and social damage on Greece.

The six month interim period would be used to negotiate a long-term deal for recovery and growth incorporating further debt relief measures promised by the Eurogroup in 2012.

Euro zone partners have so far said Athens must comply with the terms of the current bailout, which require it to run a 3 percent primary budget surplus this year, before debt service payments.

Senior euro zone officials were due to hold a teleconference later on Thursday to discuss the Greek application.

The wording chosen could help to satisfy at least some of the concerns that have held up agreement over the past two weeks, allowing Athens to avoid saying it is extending the current programme that it opposes while creditors can avoid accepting a “loan agreement” without strings attached.

Crucial details remain to be clarified on the fiscal targets, labour market reforms, privatisations and other measures due to be implemented under the existing programme.

Government spokesman Gabriel Sakellaridis dismissed a German newspaper report that Athens was under pressure to impose capital controls on Greeks pulling their money out of local banks, telling Reuters that such a scenario “had no bearing on reality”.

An ECB spokeswoman also denied the Frankfurter Allgemeine Zeitung report, saying there had been no discussion of capital controls at a meeting of the central bank’s Governing Council on Wednesday, which slightly raised the limit on emergency lending to Greek banks.

Greek stocks rose on Thursday’s developments, with the benchmark Athens stock index up 2 percent while banks gained 9 percent.

“We are doing everything to reach a mutually beneficial agreement. Our aim is to conclude this agreement soon,” Sakellaridis told Skai TV earlier on Thursday. “We are trying to find common points.”

GERMAN COMPROMISE?

EU paymaster Germany and fellow euro zone governments have so far insisted no loan deal without the full bailout conditions is on the table. Tsipras promised to ditch austerity measures imposed by the lenders when he was elected last month.

German Finance Minister Wolfgang Schaeuble has poured scorn on suggestions that Athens could negotiate an extension of euro zone funding without making any promises to push on with budget cuts and economic reforms.

But on Wednesday he indicated there may be some possibility of a compromise. “Our room for manoeuvre is limited,” he said during a debate in Berlin, adding, “We must keep in mind that we have a huge responsibility to keep Europe stable.”

Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government’s proposal on Friday. “The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup,” he said.

Greece’s finances are in peril. It is burning through its cash reserves and could run out of money by the end of March without fresh funds, a person familiar with the figures said.

Likewise its banks are dependent on the emergency funding controlled by the ECB in order to pay out depositors who have been withdrawing their cash. The ECB agreed on Wednesday to raise a cap on funding available under its Emergency Liquidity Assistance scheme to 68.3 billion euros (US$78 billion), a person familiar with the ECB talks said.

That was a rise of just 3.3 billion euros, less than Greece had requested. The modest increase raises the pressure for a compromise at the Eurogroup. One senior banker said it would be enough to keep Greek banks afloat only for another week if present outflow trends persist.

Euro zone finance ministers rejected Greek proposals to avoid the bailout conditions at a meeting on Monday.

German Chancellor Angela Merkel made clear on Wednesday that Athens would have to give as well as take in negotiations.

“If countries are in trouble, we show solidarity,” she said in a speech to conservative supporters, naming Greece and other euro zone countries that had to take bailouts during the debt crisis. But she added, “Solidarity is not a one-way street. Solidarity and efforts by the countries themselves are two sides of the same coin. And this won’t change.” (Additional reporting by Renee Maltezou and Deepa Babington in Athens, Jan Strupczewski in Brussels, Gernot Heller, Michael Nienaber and Caroline Copley in Berlin, Jason Lange in Washington and Paul Carrel in Frankfurt; Writing by David Stamp and Deepa Babington; Editing by Peter Graff and Paul Taylor)

Politics & GovernmentBudget, Tax & EconomyECB […]

Greece submits request for loan extension from sceptical euro zone

* Athens uses vital EU wording to request extension

* Euro zone officials to discuss whether letter meets terms

* Greek bailout deal due to expire on Feb. 28

* State faces running out of cash by late March – source

* ECB raises emergency funding for Greek banks only modestly (Adds)

By Renee Maltezou and George Georgiopoulos

ATHENS, Feb 19 (Reuters) – Greece formally requested a six-month extension to its euro zone loan agreement on Thursday as it races to avoid running out of cash within weeks and overcome resistance from sceptical partners led by Germany.

With its EU/IMF bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late March.

Specifically, Athens asked for an extension to its so-called “Master Financial Assistance Facility Agreement” with the euro zone, the official told Reuters. However, Greece is proposing that the terms are different from its current bailout obligations, the official said.

Jeroen Dijsselbloem, chairman of the Eurogroup of finance ministers of the currency area, confirmed the news, tweeting: “Received Greek request for six-month extension.” He gave no further details.

The request boosted hopes for a last minute compromise to avert a Greek bankruptcy and exit from the euro zone however it was not clear if the proposal would be acceptable to euro zone partners who insist Athens comply with all bailout terms.

Senior euro zone officials were due to hold a teleconference later on Thursday to discuss the Greek application. If they are satisfied, then Eurogroup finance ministers will hold a conference call on Friday to conclude an agreement, euro zone sources said.

The wording chosen could help satisfy at least some of the concerns that have held up agreement over the past two weeks, allowing Athens to avoid saying it is extending the current programme that it opposes while creditors can avoid accepting a “loan agreement” without strings attached.

However, crucial details remain to be clarified on fiscal targets, labour market reforms, privatisations and other measures due to be implemented under the existing programme.

Government spokesman Gabriel Sakellaridis dismissed a German newspaper report that Athens was under pressure to impose capital controls, telling Reuters that such a scenario “had no bearing on reality”.

An ECB spokeswoman also denied the Frankfurter Allgemeine Zeitung report, saying there had been no discussion of capital controls at a meeting of the central bank’s governing council on Wednesday, which slightly raised the limit on emergency lending to Greek banks.

Greek stocks rose on Thursday’s developments, with the benchmark Athens stock index up 2 percent while banks gained 4.8 percent.

“We are doing everything to reach a mutually beneficial agreement. Our aim is to conclude this agreement soon,” Sakellaridis told Skai TV earlier on Thursday. “We are trying to find common points.”

GERMAN COMPROMISE?

EU paymaster Germany and fellow euro zone governments have so far insisted no loan deal without the full bailout conditions is on the table. Tsipras promised to ditch austerity measures imposed by the lenders when he was elected last month.

German Finance Minister Wolfgang Schaeuble has poured scorn on suggestions that Athens could negotiate an extension of euro zone funding without making any promises to push on with budget cuts and economic reforms.

But on Wednesday he indicated there may be some possibility of a compromise. “Our room for manoeuvre is limited,” he said during a debate in Berlin, adding, “We must keep in mind that we have a huge responsibility to keep Europe stable.”

Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government’s proposal on Friday.

“The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup,” he said.

Greece’s finances are in peril. It is burning through its cash reserves and could run out of money by the end of March without fresh funds, a person familiar with the figures said.

Likewise its banks are dependent on emergency funding controlled by the European Central Bank in order to pay out depositors who have been withdrawing their cash. The ECB agreed on Wednesday to raise a cap on funding available under its Emergency Liquidity Assistance scheme to 68.3 billion euros (US$78 billion), a person familiar with the ECB talks said.

That was a rise of just 3.3 billion euros, less than Greece had requested. The modest increase raises the pressure for a compromise at the Eurogroup. One senior banker said it would be enough to keep Greek banks afloat only for another week if present outflow trends persist.

Finance ministers of the 19-nation currency bloc rejected Greek proposals to avoid the bailout conditions at a meeting on Monday.

German Chancellor Angela Merkel made clear on Wednesday that Greece would have to give as well as take in negotiations.

“If countries are in trouble, we show solidarity,” she said in a speech to conservative supporters, naming Greece and other euro zone countries that had to take bailouts during the debt crisis. But she added, “Solidarity is not a one-way street. Solidarity and efforts by the countries themselves are two sides of the same coin. And this won’t change.” (Additional reporting by Renee Maltezou and Deepa Babington in Athens, Jan Strupczewski in Brussels, Gernot Heller, Michael Nienaber and Caroline Copley in Berlin, Jason Lange in Washington and Paul Carrel in Frankfurt; Writing by David Stamp and Deepa Babington; Editing by Peter Graff and Paul Taylor)

Politics & GovernmentBudget, Tax & Economyloan agreementGreek bailoutEuro zone […]

Greece to seek loan extension from Euro zone

By Lefteris Papadimas and Jan Strupczewski

ATHENS/BRUSSELS (Reuters) – Greece is expected to ask on Thursday for an extension to its “loan agreement” with the euro zone as it faces running out of cash within weeks, but it must overcome resistance from sceptical partners led by Germany.

With Greece’s bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late next month.

Financial markets rallied after Athens said on Wednesday it would submit a request to extend the loan agreement for up to six months, hoping this signalled a last minute compromise to avert a Greek bankruptcy and exit from the euro zone.

EU paymaster Germany and fellow euro zone governments have insisted that no such deal is on the table and Athens must seek an extension to its full bailout, the very programme that Tsipras promised to ditch when he was elected last month.

German Finance Minister Wolfgang Schaeuble has poured scorn on suggestions that Athens could negotiate an extension of euro zone funding without making any promises to push on with budget cuts and economic reforms.

But on Wednesday he indicated there may be some possibility of a compromise. “Our room for manoeuvre is limited,” he said during a debate in Berlin, adding, “We must keep in mind that we have a huge responsibility to keep Europe stable.”

Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government proposal in a teleconference on Friday. “The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup,” he said.

FINANCES IN PERIL

Greece’s finances are in peril. It is burning through its cash reserves and could run out of money by the end of March without fresh funds, a person familiar with the figures said. The person said Athens had enough to repay a 1.5 billion euro instalment to the International Monetary Fund next month but would struggle to pay public sector salaries and pensions in April.

Likewise its banks are dependent on emergency funding controlled by the European Central Bank. The ECB agreed on Wednesday to raise a cap on funding available under the Emergency Liquidity Assistance scheme to 68.3 billion euros (£50.4 billion), a person familiar with the ECB talks said.

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Greek Prime Minister Alexis Tsipras meets with former Greek Interior Minister and former New Democra …

That was a rise of just 3.3 billion euros, below what Greece had requested. “The increase in the cap was a bit below what was requested, about 5 billion more, and expected,” one senior banker said. “Assuming the present outflow trends persist, it is enough to carry us over for another week.”

This modest increase keeps Greece’s banks, and thereby the government, on a tight leash and raises the pressure for a compromise at the Eurogroup.

Whether finance ministers of the 19-nation currency bloc, who rejected such Greece’s ideas at a meeting on Monday, accept its request as a basis to resume negotiations will depend on how it is formulated, an EU source said. The wording has to match EU legal texts to win approval in several euro zone parliaments.

Tsipras said talks were at a crucial stage and his demands for an end to austerity were winning backing. “We have managed for the first time through contacts with foreign leaders to create a positive stance on our requests,” he said at a meeting with President Karolos Papoulias.

In a sign of concern in Washington at the financial risks to a strategically located NATO ally, U.S. Treasury Secretary Jack Lew telephoned Varoufakis to urge Greece to strike a deal with the euro zone and IMF, warning that failure would lead to immediate hardship.

Lew said the United States would continue to prod all parties in the talks to make concrete progress, noting that uncertainty was “not good for Europe.”

The Athens government released documents on Wednesday indicating that it was taking a more flexible line to placate euro zone creditors than its anti-bailout rhetoric at home has suggested. They showed Varoufakis had offered to accept conditions on an extension to its loan agreements and even an inspection by the European Commission at a fraught meeting in Brussels on Monday.

German Chancellor Angela Merkel signalled on Wednesday that Greece would have to give as well as take in negotiations.

“If countries are in trouble, we show solidarity,” she said in a speech to conservative supporters, naming Greece and other euro zone countries that had to take bailouts during the debt crisis. But she added, “Solidarity is not a one-way street. Solidarity and efforts by the countries themselves are two sides of the same coin. And this won’t change.”

(Additional reporting by George Georgiopoulos, Lefteris Papadimas and Deepa Babington in Athens, Jan Strupczewski in Brussels, Gernot Heller, Michael Nienaber and Caroline Copley in Berlin, Jason Lange in Washington and Paul Carrel in Frankfurt; Writing by David Stamp; Editing by Toni Reinhold)

Politics & GovernmentBudget, Tax & EconomyAlexis Tsiprasloan agreement […]

ECB offers Greek banks more cash

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BBC News – ECB offers Greek banks extra €3.3bn emergency cash

Prime Minister Tsipras: “We are not in a hurry and we will not compromise”

On Tuesday, Greek Prime Minister Alexis Tsipras called for a vote in the Greek parliament on whether to scrap the austerity programme on Friday, the same day as the eurozone deadline.

“We will not succumb to psychological blackmail,” Mr Tsipras told parliament. “We are not in a hurry and we will not compromise.”

US investment bank JP Morgan claimed over the weekend that €2bn worth of deposits was flowing out of Greek banks each week. It estimated that if that were to remain the case, they would run out of cash to use as collateral against new loans within 14 weeks.

JP Morgan’s estimate is based on a calculation that a maximum of €108bn of deposits is left in Greek banks.

The most up-to-date figures from the Greek central bank show deposits dropped 2.4% month-on-month in December to €160.3bn from €164.3bn, marking the third consecutive monthly fall.

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What would happen if Greece left the euro? Grexit explained – in 60 seconds

Dutch Finance Minister Jeroen Dijsselbloem, who is also chairing the Eurogroup meetings of eurozone finance ministers, warned on Monday night there were just days left for talks.

Mr Dijsselbloem said it was now “up to Greece” to decide if it wanted more funding or not.

Analysis: Theo Leggett, BBC business reporter:

The apparent deadlock in Brussels is hardly surprising, because the two sides have very different goals.

The Greek government wants to scrap the current bailout deal, because of the very painful programme of spending cuts and other austerity measures that come with it. Instead, it wants a bridging loan to help it meet its short term needs, while a new deal is hammered out. Having been elected on an anti-austerity ticket, it can’t afford to back down, or it will be accused of betraying Greek voters.

But other members of the eurozone, and Germany in particular, have a very different agenda. They want Greece to accept an extension to the current deal – with the rather uncertain promise of “flexibility” if it plays ball.

They don’t want to show any signs of weakness, because of the signal that could send to anti-austerity movements in countries such as Spain, Portugal or Cyprus.

It would also be politically toxic in Germany, where many voters dislike the idea that they are paying for Greece’s mistakes.

That doesn’t mean a compromise is impossible. It simply means any deal would have to be presented as both an end to the current austerity programme and a continuation of it. A political fudge, in other words – and Brussels has plenty of experience in putting those together. So a short-term solution is possible, but far from certain.

Key dates for Greece – and the eurozone

28 February – Current programme of loans ends

First quarter of 2015 – Greece’s funding needs estimated at €4.3bn by end of March

19-20 March – EU leaders’ summit

20 July – €3.5bn bonds held by the European Central Bank mature

20 August – €3.2bn bonds held by the European Central Bank mature

Greece has proposed a new bailout programme that involves a bridging loan to keep the country going for six months and help it repay €7bn (£5.2bn) of maturing bonds.

The second part of the plan would see the county’s debt refinanced. Part of this might be through “GDP bonds” – bonds carrying an interest rate linked to economic growth.

Greece also wants to see a reduction in the primary surplus target – the surplus the government must generate (excluding interest payments on debt) – from 3% to 1.49% of GDP.

In Greece last week, two opinion polls indicated that 79% of Greeks supported the government’s policies, and 74% believed its negotiating strategy would succeed.

More on This Story

Last night’s acrimonious breakdown of talks to refinance Greece presents Germany and other eurozone government’s with their toughest decision since the single currency’s creation in 1999.


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Banks boost equity, loan provisions in H1 ahead of ECB tests

* Results of the ECB’s landmark bank tests due Oct. 26

* Top 20 euro zone banks’ equity up 26 billion euros in H1

* Bad loans top 500 billion euros, 11.1 pct of loan books

* Bad loans not provided for are a third of banks’ equity

* For Graphic:

* http://graphics.thomsonreuters.com/14/europeanbanks_tests/index.html

By Laura Noonan

LONDON, Oct 2 (Reuters) – Attempts by the euro zone’s 20 largest banks to anticipate the outcome of European Central Bank stress tests continued in earnest in the first half, as lenders boosted equity levels and set aside more money for bad loans.

Data compiled by Reuters shows the 20 listed banks increased equity by 4 percent, or 26 billion euros ($33 billion), in the period and put a similar amount into loan loss provisions ahead of the ECB ruling on whether banks must raise cash, or revalue assets.

But vulnerabilities remain. The data shows banks have not taken provisions for bad loans worth about a third of equity. This means there could be a profound impact on banks’ capital if the ultimate loss on these loans is higher than banks expect — because the value of their loan collateral has fallen.

The ECB’s landmark review of the euro zone’s 131 most important banks is designed to banish lingering doubts about whether lenders value assets properly and are strong enough to withstand another recession or financial meltdown.

Previous stress tests have faced criticism for not making banks raise significant amounts of capital, or take drastic action. The ECB wants these tests to be judged not only on what banks must do at the end, but on what they did in the run up.

The results are due at on Oct. 26 and analysts say these top 20 listed banks, the lenders most closely watched by investors, may have to do more to recognise their bad loans.

“Major euro-area banks have strengthened balance sheets including some 20 billion euros of one-off provisions (for loan losses) since mid-2013,” said Kinner Lakhani of Citi’s European banking research team. “However, we still expect the ECB to further shift the goalposts.”

RACE FOR EQUITY

Spurred on by buoyant equity markets and hints from regulators wanting to avoid a chaotic scramble for capital after the tests, banks have been raising and hoarding equity since the ECB’s health checks were first billed more than a year ago.

Only five of the 20 banks saw a fall in equity in the first half, and the drop was only significant for one, BNP Paribas . The French bank’s equity dipped 6.5 billion euros, or about 7 percent of its total equity, after an $8.8 billion fine for U.S. sanctions breaches.

The equity increases were aided by after tax profits of 11.3 billion euros across the group of lenders, even though profits were down 7 billion euros from the same period a year earlier — largely because of the one-off hit at BNP Paribas.

The stress tests are based on banks positions at the end of 2013, but any new equity accumulated since then can be offset against the ECB’s capital demands. This means some banks could have solved any problem before it is even pointed out.

“There will be banks (that) fail but the point is not really how many banks fail,” said Andrea Enria, head of the European Banking Authority, which is coordinating the stress tests.

“The point is to understand how much adjustment has been made, how much this process has really changed the system,” he said on the sidelines of a Sept. 30 conference.

FACING UP TO LOSSES

Equity increases have been the most public part of banks’ evasive action ahead of the ECB tests, but the shift in the way they recognise and treat bad loans has been just as significant.

The Reuters data shows the level of bad loans recognised by the 20 banks rose was stable at just over 500 billion euros. But banks took an extra 26 billion euros of provisions for losses on those loans, even though the euro zone’s economy strengthened.

Troubled loans now account for 11.1 percent of banks’ total loans. Greece’s Piraeus has the highest proportion of bad loans, accounting for 38.5 percent of total loans, ahead of National Bank of Greece on 23.2 percent.

“(The ECB) is taking away optionality and flexibility from banks and forcing banks to come clean,” said Neil Williamson, of Aberdeen Asset Management’s credit research team.

But in the case of Piraeus and Bank of Ireland bad loans not covered by provisions still exceeded equity. Both banks declined to comment.

Williamson said the level of provisions relative to bad loans, and bad loan recognition alone, do not reveal the true state of banks’ finances. He said the ECB could still force changes so banks’ take account of what their loan collateral is really worth in practice.

“The question mark is the value of collateral,” he said. “If it’s housing stock in a liquid market, then it’s relatively okay, if it’s Greek real estate … or big ticket items like 200 million euros to 300 million euros loans to property developers in markets where property isn’t turning over, (it’s less so).”

Citi’s Lakhani agreed. “Our main concern relates to collateral values where the ECB could take a more conservative approach,” he said. “The extent to which we see AQR (asset quality review) adjustments could reset views on banks and the sector as a whole.”

(1 US dollar = 0.7940 euro)

(Additional reporting by Olivia Hardy; editing by David Clarke)

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Payday Loan Companies Accused of Gross Financial Fraud

Image Payday-Companies-Accused-1024x596.png

The U.S. authorities decided to step once again against predatory online payday lending schemes. While payday loaning businesses are notorious for their fish-like abilities to find loopholes in state and federal financial legislation, this time they took money from people’s accounts for loans they did not take.

U.S. Consumer Financial Protection Bureau officials say that Hydra Group (really…Hydra?) and other companies have engaged in illegal financial operations. The defendants allegedly trapped consumers into payday loans they did not ask for.

“Rarely is a company so appropriately named. Like the multiheaded serpent in Greek mythology, the Hydra Group is actually a conglomeration of about 20 businesses with various names,” said CFPB Director Richard Cordray.

The CFFPB won a file federal court ruling that freezes the assets of payday company owners. So what exactly did they do? We know too well that online payday loans are predatory by nature, as they apply huge interest rates. But Hydra Group used private user data bought from lead generators.

Anytime you go online and shop for a payday loan, you have to fill in your name, Social Security number, as well as other data. The data is stored and companies such as Hydra Group can buy it and use it to deposit unauthorized loans into your bank account. Hydra Group deposited sums of $200-300 in people’s accounts and started withdrawing $60 to $90 finance charges every two weeks. Moreover, they did not even reduce the amount of the initial loan.

So this is how Hydra Group managed to make $115.4 million out of $97.3 million unwanted loans. Over 1.000 complaints have been made against the group’s companies running in several states like Pennsylvania, Idaho and New Hampshire.

The problems caused by payday loans have been tackled by consumer advocates and public institutions. This type of loans should be avoided by all means. Unfortunately, low-income households are the most affected by this predatory industry.

Right now, the CFPB is after Hydra Group, but they plan to analyze the lead-generating companies’ activities and their role in the financial fraud.

Earlier this month, another payday loan company has been accused of the same type of financial fraud against households from Missouri. During an 11 months period, the company placed $28 million worth of loans in bank accounts, after which they charged fees. In 2013 they ended up extracting almost $47 million from bank accounts.

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Cyprus may presell gas reserves to ease crisis

NICOSIA, Cyprus (AP) — Cyprus may presell the country’s offshore natural gas reserves to raise cash quickly and pull it out of its deep financial crisis, the country’s finance minister said Thursday.

Harris Georgiades said the country’s nascent gas sector still has some way to go before such weighty decisions are taken. But all options that will help the country extricate itself from the tough terms of multibillion euro rescue package that it negotiated with its euro area partners and the International Monetary Fund last March will be poured over.

“All possibilities will be examined within the framework of taking those decisions that will maximize the benefit for our economy,” Georgiades told the Associated Press in an interview when asked if the government is mulling such a gas presale.

Cyprus energy officials estimate that Cypriot waters hold about 60 trillion cubic feet (1.7 trillion cubic meters) of gas, enough to cover domestic needs for decades and supply energy-hungry foreign markets.

One recently discovered field that U.S. firm Noble Energy and Israeli partner Delek are developing is estimated to hold 5-8 trillion cubic feet (140-230 billion cubic meters) of gas.

Oil and gas companies including Italy’s ENI, France’s Total and South Korea’s Kogas have been licensed to search for mineral deposits off the island nation’s southern coast and are expected to spearhead development of a gas processing facility that will liquefy the gas for easier export.

But Georgiades said any future gas revenue won’t detract the government from enacting “whatever it takes” to fix a broken economy, including tackling an oversized public sector that had taken up nearly a third of all government spending.

The Cypriot economy is projected to shrink by 13 percent of gross domestic product in the next couple of years and see joblessness rise to 14 percent.

“We are very determined to take all necessary decisions irrespective of how unpopular we might be. It’s not a popularity contest…It will not be easy, I’m not going to present a rosy picture,” Georgiades said.

Georgiades said that limits on bank transactions that were put in place last March to prevent a bank run will be fully lifted eventually, but authorities won’t act “hastily” before trust is fully restored in the shaky banking system.

The limits, which include a daily withdrawal cap of 300 euros, were deemed necessary after the bailout agreement forced depositors with more than 100,000 euros in the country’s two largest lenders to incur significant losses. The country’s No. 2 bank Laiki, which was hardest hit from its exposure to toxic Greek debt and loans, has been wound down and folded into the larger Bank of Cyprus.

Nobody can offer a date because that won’t be done on the basis of a time frame but rather on the basis of how the market and the banking system are reacting to developments,” Georgiades said. “I see positive signs, but we shall not be making hasty steps. This has to be done carefully, not under the pressure of time.”

Georgiades said selling Cyprus’ gold reserves — another bailout condition — may not be necessary if the country finds other income to repay a 10 billion euro loan that the country will receive from other Eurozone countries and the IMF over the next four years.

“I think it goes without saying that if we’re able to determine alternatives, then there will be no need to dispose of the gold reserves,” he said, adding that Cyprus could have benefited from a “rather larger” loan that would make it easier for the country to meet its fiscal targets.

Georgiades said there would be no delay to Russia’s easing of the terms of a 2.5 billion euro loan it granted Cyprus in 2011, when it lost access to bond markets.

He said Moscow made it clear that it would lower the 4.5 percent interest rate on the loan and extend the 2016 repayment deadline by several years once the entire bailout procedure was completed.

Cyprus received its first installment of around 2 billion euros in bailout cash this week.

Georgiades said two recently-concluded independent audits have dispelled any notion that Cypriot banks were money laundering hubs. Media reports, especially from Germany, had suggested that Russian oligarchs had preferred Cyprus’ banks to launder their ill-gotten money.

“The two audits that were commissioned verify that this bad press was unfair, unfounded and excessive,” Georgiades said. He added that Cypriot authorities would move to eliminate any loopholes that the audits had pinpointed.

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