How long will the public maintain high cash resources?

By Tasos Dasopoulos

After the conquest of the investment stage, near the end of 2022 or the beginning of 2023, the policy of cash will start, which started from 32 billion euros in the summer of 2018 and today reaches 39.5 billion euros.

It should be noted that out of the amount of 39.5 billion, 36.8 billion is debt and therefore its maintenance costs. The 15.7 billion euros is the last installment of the 86 billion loan from the ESM loan. The banking assets of public organizations held in the joint account of the Bank of Greece are currently close to 10 billion euros. However, their use by YPOIK, presupposes their borrowing from the organizations that have them available, through a repurchase agreement (repo) and in fact with an interest rate close to 2%, significantly higher than what the country borrows, from the markets.

About 11 billion euros are the rest of the funds raised by YPOIK from the purchases through bonds and 4 billion euros, is the advance from the funds of the Recovery Fund.

The cash received by the current leadership of the Ministry of Finance, was about 32 billion euros with a similar composition to today. At the beginning of the health crisis, the cash available after successful bond issues had reached 37.5 billion euros. The 43.3 billion euros of support measures, which were given to deal with the consequences of the health crisis in 2020 and 2021, “passed” through the cash account. In addition to the bond issues, the cash resources were strengthened from 2019. and with 3.9 billion of the 6 installments from the profits of ANFA’s SNP’s bonds.

The maintenance of high cash resources was dictated in the two years 2020-2021, by the need to have money in the fund so that the needs created by the pandemic, which reached 26 billion in 2020 and 17.3 billion in 2021, could be met immediately. , while measures of 2.9 billion euros are planned for 2022. The positive thing is that the cost of renewing cash from the markets (ie lending rates) decreased from 3.5% in 2019, to levels below 1 % today despite the pandemic.

The investment grade is a milestone

However, the primary goal of the “pillow” was the smooth return of Greece to borrowing from the markets. For this reason, the first part of the cash amounting to 15.6 billion, was given by the ESM when Greece came out of the 3rd memorandum, so that there is a safety cushion when Greece returns to borrowing from the markets.

Although since mid-2019 Greece has made leaps and bounds in its return to markets and managed to participate since March 2020 in the ECB’s extraordinary bond market program (PEPP) and despite its debt upgrades, Greece has not yet conquered the investment grade. Consequently, Greek securities are more vulnerable than other government bonds in the Eurozone to market fluctuations.

A first installment of the cash flow will be at the beginning of 2022 when the repayments of the balance of the loans amounting to 1.8 billion euros from the IMF loans and 5.2 billion euros from the bilateral loan will be approved and proceeded. of 52.3 billion euros, from the rest of the Eurozone countries.

However, when at the end of 2022, when Greece will have come out of the enhanced supervision and will conquer the investment level, then there will be no reason to maintain high cash resources. This is because interest rates will fall to the levels of the other EU Member States. With the investment tier, Greece will normally participate in any future quantitative easing programs. The most important thing then is for conservative and long-term investors to invest more in Greek bonds, such as insurance funds, which are currently limited due to the country’s credit rating.