The Greek Government has issued a decree requiring all public entities and local councils to surrender all their reserves to the Greek Central Bank.

Given the urgent need for funding, the Executive, in its inability to generate cash, issued an order to allow the government to fund pensions and salaries.

“With this decree, the government hopes to meet needs of the State which are worth 3 billion euros in the next 15 days,” said the Executive. The rule must still be approved by Parliament.

These urgent needs include 1.1 billion euros for the payment of public wages later this month, 850 million in pensions, 200 million for the payment of interest on the debt and 746 million to be paid to the International Monetary Fund (IMF) by May 12.

It is not the first time that the government headed by Alexis Tsipras uses funds from public entities to deal with government payments. In March, he made use of the same system to pay salaries and pensions corresponding to April.

The difference this time is that back in March, the transfer from government agencies was voluntary and now the action is mandatory and extends into the coffers of the municipalities. After announcing the measure, the Greek three-year bond rose to over 28%.

The money from public agencies will be transferred to a special account of the Bank of Greece, which will be remunerated at a rate of 2.5%, reports AFP. The European Central Bank (ECB) has banned the Greek banks from buying more Greek debt, which eliminated the financing of debt for the Greek Government.

The absence of a prospect of agreement between the Government and the European institutions, aggravated the financial situation in Greece with each passing day.

Analysts don’t believe that an agreement between Greece and Europe will be reached at the next Eurogroup meeting to be held Friday in Riga, Latvia. Such an agreement would also be delayed during the following Eurogroup meeting, scheduled for May 11.

Increasingly, analysts are confident that Greece will declare itself incapable of paying one of its loan installments. What happens after that episode depends on who Athens fails to pay and what is the subsequent reaction of depositors.

A default on IMF loans would leave Greece out of international public finance.

Reports in the media suggest that the ECB has even considered the possibility of creating a parallel currency for Greece, a sort of promissory note, with which the country could make payments to pensions, wages and taxes while staying within the euro zone.

Athens hopes that eventually the European institutions will have access to disburse the 7.2 billion euros pending from the previous bailout and that the money will allow negotiations to continue in the coming months.

But its partners require some progress on fiscal and pension reform and the privatization plan, that the Tsipras government refuses to approve.

“The default seems inevitable. We believe that the Greek government will come to some agreement with its creditors to unlock the 7.2 billion that is outstanding. We do not recommend having Greek debt at this juncture because it doesn’t seem that volatility will be reduced in the short term,” says Eirini Tsekeridou, fixed income analyst at Julius Baer.

It does not seem that under these conditions Greece will grow 2.5%, which was calculated by the IMF this year.

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