Athens mayor on guard to protect city's cash from the government

The fund-grabbing decree came like a bolt from the blue, according to the mayor of Athens.

Yiorgos Kaminis was in Vienna late last month at a gathering of mayors of EU capital cities when he heard the news: Greece's local authorities had to hand over their entire cash reserves to help avert a possible sovereign default.

"I thought for a moment I should take the next flight back to Athens. Then I decided it was better to discuss it with my (European) colleagues," Mr Kaminis told the FT, adding that several European mayors were as shocked as he was.

The move by the leftwing Syriza-led government of prime minister Alexis Tsipras to raid municipal reserves was one of the most dramatic signs of Greece's desperate need for cash as its coffers run dry.

Athens has been seeking a fresh bailout deal with international lenders, which would give it access to a €7.2bn aid package frozen since last year.

Mr Tsipras's latest prediction that an agreement would be struck this weekend has proved over-optimistic. An official in Athens said on Sunday the negotiations had run into problems over the creditors' insistence on further pension cuts and measures to permit mass dismissals of private sector workers. Both demands are "red lines" that Syriza cannot accept, according to Mr Tsipras.

The parties are to resume talks on Monday. They are hoping to clinch a deal before a meeting of eurozone finance ministers on May 11 - a day before a cash-strapped Athens must make a €750m payment to the International Monetary Fund.

The mayors of Greece's 330 municipalities say they want to help the government but are not prepared to hand over unconditionally their entire €1.2bn stash of funds. So far, only a handful of Syriza-run local authorities have complied with the decree.

"Much of the money the municipalities have in the bank was contributed by taxpayers for the running of local administrations. We need to be consulted … and to strike a balance between assisting the central government and maintaining our operations," said Mr Kaminis, a former national ombudsman who was re-elected mayor last year. He ran as an independent and was backed by centre-left voters.

The Syriza-led government struggled in February and March to scrape together enough cash to pay pensions and public sector salaries and at the same time meet debt repayments due to the IMF.

<

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

George Patoulis, the chairman of the union of Greek municipalities, last week led a delegation of senior mayors to press Mr Tsipras to modify the measure.

"We saw the prime minister to press for clarifications about what our obligations would be, given that we need to keep aside funds, for example to run our social programmes . . . Nobody's got back to us yet," said Mr Patoulis, a centre-right independent serving his third term as mayor of Maroussi, a business and residential district in the Greater Athens area.

Another reason Greek municipalities are loath to comply with the decree is that transfers from state agencies, which make up some 70 per cent of their annual budgets, have grown more irregular during the crisis.

Mr Kaminis said this year's Athens city budget of €670m has to be recalibrated regularly to take account of the fluctuations in income. Mr Patoulis said that municipalities around the country were fretting they would slip further down the government's list of funding priorities if the cash squeeze continued much longer.

Municipalities have already been forced to pare back spending because of the crisis, slashing budgets by an average 40 per cent since Greece's boom years in the mid-2000s. At the same time they stepped in with poverty alleviation programmes as unemployment rates soared while benefits were reduced.

"The social policy of this country is maintained by local authorities," says Mr Kaminis. "We run soup kitchens and provide meals for children attending municipal kindergartens, we have hostels for the homeless, we distribute medicines . . . We already make a big contribution to tackling the crisis."

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation