Greek bond yields jump after EU rejects EUR1.2bn from bank recapitalisation fund
Greece’s hopes of recapturing €1.2bn from the Greek bank recapitalisation fund were quashed on Wednesday by Eurozone officials when they informed the Syriza government that the country had no legal claim on the cash.
According to the Financial Times, Greece’s government believes the funds for Greek banks were sent back to Eurozone authorities in error last month when, under pressure from Germany, finance ministers agreed all the remaining €10.9bn in the bank rescue facility should be returned to the Eurozone's bailout fund, the European Financial Stability Facility.
However, on a conference call between deputy ministers from all Eurozone finance ministries, Greek lawmakers were told that the €1.2bn was properly returned and the cash would stay with the bailout fund, meaning the Greek government had no legal claim over the cash.
"There was agreement that, legally, there was no overpayment from the [Greek bank recapitalisation fund] to the EFSF," said an EFSF spokesman.
Greece was looking to reclaim the €1.2bn to put into its coffers as the country fast runs out of cash. “The government has reportedly been resorting to swaps with various government arms (e.g. public health fund and Athens metro) to raise short-term cash,” noted analysts at Brown Brothers Harriman.
Greece faces a €1.7bn bill for wages and pensions at the end of the month and then a €450m loan payment to the International Monetary Fund on April 9. Greek government and EU officials believe Athens does not have funds to cover both.
The latest move by the Eurozone could fan the flames of further discord between Greece and the rest of the EU however analysts believe the move could force Greece to accelerate its reforms list to present to the EU in the coming days.
“We continue to believe a deal will be struck shortly, and the ‘Grexit’ fears will ease (though may return toward the end of next month),” said the analysts at Brown Brothers Harriman.
They added that if the Greek government submits, for the third time, a set of reform proposals that its official creditors will find credible, EU leaders could possibly prepare for some micro-tranche payment as early as next week.
For the moment, Greek borrowing costs are on the up as investors worry about the current brinkmanship between Greek and EU lawmakers. The yield on the country's three-year government bond jumped by 23 basis points to more than 19% midday in Europe. The 10-year yield rose 13 basis points to stand at 10.625%.