KEDE: Municipalities should not transfer their cash reserves to the Bank of Greece

Municipalities should not transfer their cash reserves to the Bank of Greece, their union urged on Tuesday following a meeting with Alternate Finance Minister Dimitris Mardas, who briefed both the local administrators during their emergency meeting and the regional governors at theirs, earlier, on the measure.

The Central Union of Municipalities and Communities of Greece (KEDE) opposed a recent government decision obliging by law all cities and several public-sector agencies to transfer their cash reserves to a special account at the country’s central bank. The law exempted social insurance funds and companies listed on the Athens bourse with a government stake. The emergency legislation, described as “an extremely urgent and unforeseeable need” for the transfer of the amounts, allows the government use of the funds to cover public-sector expenses. The law is backdated to March 17.

While briefing the regional governors at their union meeting, Mardas explained that regions should calculate their needs for the next fortnight, keeping the required funds and turning the rest over to a special account at the Bank of Greece which will provide a 2.5 percent interest. When regions need additional funds, they will be able to draw them immediately, if the amount required does not exceed 10 percent of the capital originally deposited. If it exceeds 20 percent, they need to file an application, getting the amount within two days.

The measure, he said, will bring in up to 2.5 billion euros, which will be placed in repos and used for the country’s running needs.

The regional directors called the decision “a violent constitutional overturn,” violating the principle of local authorities’ self-governance. They also said the measure threatened to put a stop to growth projects that came under NSRF funds, which would jeopardise EU funding among other repercussions.

Mardas also explained the same process to the municipalities at their meeting.

According to explanations by the government preceding Tuesday’s regional authorities meetings, a recent government amendment fully guarantees the cash reserves of public-sector entities with a right to compensation from the state. Several bodies have already deposited their cash reserves at the Bank of Greece and were able to withdraw necessary amounts, it said, citing the case of Attiko Metro which recently withdrew 150 million euros from the central bank.