April 25, 2015 / 1:45 PM / 5 years ago

Greece's governors agree to lend cash to central government

ATHENS (Reuters) - Greece’s governors and other local officials agreed on Saturday to lend cash to the near-bankrupt central government after Prime Minister Alexis Tsipras assured them the measure would last for only a short period of time.

A Greek national flag flutters atop Lycabetus hill in Athens, April 22, 2015. REUTERS/Kostas Tsironis

Greek lawmakers approved a decree late on Friday to force state entities to lend cash to the central government in spite of protests by municipalities and labor unions.

The measure, which was approved by 156 lawmakers in the 300-seat chamber, caused an outcry by local governors, who met Prime Minister Alexis Tsipras on Saturday to seek an explanation about the necessity of the action.

“We got assurances that the measure is an emergency and temporary one, so it will become optional in a short time,” the head of the Greek group representing local government officials, Kostas Agorastos, told reporters after the meeting.

“Since he (Tsipras) talked to us honestly, and since our country needs this negotiating tool now for the negotiations to be completed, we will give it this tool,” he said.

Just weeks away from running out of cash, Athens has been tapping the cash reserves of public sector entities through so-called repo transactions to cover its needs.

On Monday it ordered entities including local governments to lend spare cash to the state while it tries to reach a deal with skeptical foreign creditors on new financial aid.

“The state is committed to paying salaries and pensions,” the government’s parliamentary speaker, Nikos Filis, told lawmakers, defending the legislation. “The money will be earning better interest rates (than what banks pay).”

In a symbolic protest, municipal workers walked off the job for three hours on Friday. Some local government officials have threatened to defy the orders, while others have said they need more information before contributing to central government coffers.

The protests added to pressure on Tsipras, whose decision to battle lenders has become increasingly unpopular. A University of Macedonia poll this week showed 45.5 percent of Greeks approved of the government’s negotiating stance, down roughly 30 percentage points from February.

Athens is locked in a dispute with its EU and IMF creditors over its proposal for a deal to obtain cash in exchange for making reforms, and progress has been limited. Euro zone finance ministers said after the end of a meeting in Riga on Friday that the prospects for a deal were distant and time was running out and accused Greece of failing to move quickly.

Athens must pay the International Monetary Fund almost 1 billion euros ($1.1 billion) in May. It has said it wants to honor its obligations and needs lenders to offer something in return.

“For all this time, Greece and the Greek people have been bleeding to fulfill their debt obligations - a proof of the government’s willingness to reach a solution,” government spokesman Gabriel Sakellaridis told Mega TV on Friday.

Additional reporting by Angeliki Koutantou and George Georgiopoulos, Editing by Deepa Babington and Dan Grebler; editing by Jane Baird

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