Anger as Greek councils ordered to hand over spare money

Greek mayors reacted strongly on Tuesday to the Syriza-led government's demand they hand over their cash reserves immediately to shore up the public finances and ensure that pensions and civil servants' salaries for April can be paid in full next week.

An emergency decree approved on Monday requires some 1,500 state entities to invest cash that is not needed in the next 15 days with the central bank's "common fund", which finances pension and salary payments and repayments of sovereign debt.

Local authorities, museums, hospitals and even orphanages are being targeted as Greece scrambles to raise €1.7bn to cover domestic obligations after paying loan instalments and interest due this month to the International Monetary Fund and other creditors.

The government has so far been unable to unlock €7.2bn of bailout funding because of slow progress in reaching a deal with creditors on further fiscal and structural reforms. It risks running out of funds completely next month, when Greece is due to repay almost €1bn to the IMF.

Dimitris Mardas, deputy finance minister, stressed that local authorities would earn annual interest of 2.5 per cent by signing short-term repurchase agreements with the central bank, compared with 1 per cent in commercial banks. He added that the funds could be transferred back "within 48 hours" at a later date.

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George Kaminis, the mayor of Athens, said the government's cash call was a blow to the independence of local government and could "asphyxiate" the normal running of the capital.

"Apart from the fact that this move is clearly unconstitutional, it takes local authorities by surprise . . . and threatens their capacity to contribute to social cohesion and urban development," Mr Kaminis told a meeting of EU mayors in Vienna on Tuesday.

He also raised the issue with Corina Cretu, the EU commissioner in charge of regional policy, a commission spokeswoman said.

<>But the spokeswoman said Brussels has no authority to weigh in on what she termed a "national treasury" decision.

Kostas Peletidis, the communist mayor of Patras, Greece's third-largest city, accused the government of "looting our cash reserves and thereby endangering the operation of local services that are crucially important for ordinary people".

George Patoulis, mayor of the Athens suburb of Maroussi and chairman of the national union of local authorities, accused the government of "acting like a dictatorship".

The union was planning to file an appeal against the decree with the council of state, he said.

The raid on local government and other state entities' offers is expected to raise about €1.2bn.

Mr Mardas said the cash reserves of Greece's struggling pension funds, estimated at around €1bn would not be touched.

Additional reporting by Peter Spiegel in Brussels

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