Alexis Tsipras, the Greek prime minister, has warned Angela Merkel that it will be “impossible” for Athens to service debt obligations due in the coming weeks if the EU fails to distribute any short-term financial assistance to the country.
The warning, contained in a letter sent by Mr Tsipras to the German chancellor and obtained by the Financial Times, comes as concerns mount that Athens will struggle to make pension and wage payments at the end of this month and could run out of cash before the end of April.
The letter, dated March 15, came just before Ms Merkel agreed to meet Mr Tsipras on the sidelines of an EU summit last Thursday and invited him for a one-on-one session in Berlin, scheduled for Monday evening.
In the letter, Mr Tsipras warns that his government will be forced to choose between paying off loans, owed primarily to the International Monetary Fund, or continue social spending. He blames European Central Bank limits on Greece’s ability to issue short-term debt as well as eurozone bailout authorities’ refusal to disburse any aid before Athens adopts a new round of economic reforms.
“Given that Greece has no access to money markets, and also in view of the ‘spikes’ in our debt repayment obligations during the spring and summer . . . it ought to be clear that the ECB’s special restrictions when combined with disbursement delays would make it impossible for any government to service its debt,” Mr Tsipras wrote.
He said servicing the debts would lead to a “sharp deterioration in the already depressed Greek social economy — a prospect that I will not countenance”.
“With this letter, I am urging you not to allow a small cash flow issue, and a certain ‘institutional inertia’, to not turn into a large problem for Greece and for Europe,” he wrote.
Mr Tsipras was rebuffed in efforts to secure quick financing from either the ECB or eurozone lenders at Thursday’s Brussels meeting with Ms Merkel and a small group of other EU leaders — including French president François Hollande and ECB chief Mario Draghi.
In an interview, Luis de Guindos, Spanish finance minister, said his eurozone counterparts would not sign off on any new bailout funding until a full set of approved reforms was passed and implemented by Greek authorities, a process that could take months.
Mr Tsipras’s five-page letter is particularly critical of the ECB, which he said had forbidden Greek banks from holding more short-term government debt than they did when they requested an extension of the current bailout last month — a cap that has prevented Athens from relying on Treasury bills to fill its urgent cash needs because Greek banks have become nearly the only buyer of such debt.
The Greek prime minister insisted the ECB should have returned to “the terms of finance of the Greek banks” that existed immediately following his government’s election — when ECB rules were more lenient — once the deal to extend Athens’ €172bn bailout through June was agreed last month.
Far from going easier on Athens, the ECB is considering whether to give its guidance to Greek banks more authority by making it a legally binding requirement not to add to their T-bill holdings. A decision is expected this week.
He also criticised the ECB for only increasing the amount of emergency central bank loans to Greek lenders “at shorter intervals than normal and at rather small increments”, arguing such drip-feeding continued to “incite speculation and spread uncertainty vis-à-vis Greece’s banking system”.
Although Mr Tsipras wrote that Athens was “committed to fulfilling its obligations in good faith and close co-operation with its partners”, he also warned Ms Merkel that a failure to find short-term funding could lead to much bigger problems.