By Mehreen Khan 22 April 2015
Stocks fall to their lowest level in three years on fears Greece's plans to raid local coffers will be blocked by municipalities
The government plans to generate up to €2bn by seizing reserves in commercial banks
Greek markets have tanked to their lowest level since the country underwent a private sector debt restructuring in 2012, on fears the government will run out of cash to pay its public sector wage bill and service international debts.
Athens stocks dipped towards 700 in early morning trading, after the country's deputy finance minister said his government faced at least a €400m shortfall to make wage and pensions payments in April.
The government has resorted to increasingly desperate measures to fill their coffers in the absence of fresh bail-out cash from its international creditors.
On Monday, an emergency presidential decree forced up to 1,500 local government bodies to transfer their excess cash reserves to the Bank of Greece.
The measure, which was pushed for by Brussels, has been met fierce resistance in the country. Giorgis Kaminis, the mayor of Athens, said he would fight the confiscation law, attacking it as "unconstitutional".
“We’re determined to use all political and legal means we can to repudiate the content of the decree,” the Union of Municipalities and Communities said in statement on Tuesday night.
The raid could generate an estimated €1.2bn to €2bn for the treasury by seizing reserves in commercial banks and shifting them to the central bank in Athens.
But Greece's labour minister said his government would seek alternative solutions should mayors and local governors resist the measures.
In a further sign of domestic troubles for the Leftist government, approval ratings for Syriza's negotiating strategy have fallen to just 45pc in April, down from 72pc in February.
The debt impasse has also seen the country's economic fundamentals degenerate. Figures from Eurostat show that 73.5pc of people who were unemployed in Greece in 2014, had been out of work for more than a year, compared with 67.1pc in 2013. Seven out of the ten EU regions with highest share of long term unemployment are also in Greece.
Pressure on the government's coffers has grown ahead of a meeting of Europe's finance ministers on Friday. The European Central Bank is reported to have demanded Greek lenders take a 50pc haircut on the collateral they use to access the emergency life support from the ECB.
However, ECB governor Benoit Coeure denied allegations that the institution was "blackmailing" the country, insisting the ECB would continue funding lenders as long as they remained solvent.
But according to reports, the central bank hiked its cap on emergency funds by a further €1.5bn today, taking the total emergency liquidity assistance to €75.5bn.
"The euro area needs Greece just as Greece needs the euro," said Mr Coeure.
"An overwhelming majority of the Greek population want to keep the euro. It is the responsibility of the Greek government to take the appropriate steps to ensure its policies are in line with these clear preferences," he told the paper."
A working group of Europe's finance ministers is due to meet in Brussels today, ahead of a meeting of the Euro group in Riga on Friday.
But Thomas Wieser, a top EU official, all but ruled out hope of a deal being reached by the euro group at the end of the week: "The clock is ticking. There won't be a new list in Riga, but over the course of May it must finally be reached."
Failure to reach an agreement would be "catastrophic" for Greece, said finance minister Yanis Varoufakis, who hinted that the two sides were gradually getting closer to striking a deal to unlock €7.2bn of bail-out cash.