Greek mayors to protest government decision to seize their cash

A man rides past flags and goods for sale in central Athens on March 30, 2015. Local authorities say they oppose a government decision to use their reserves for short-term financing. Photo: AFP.

As Greece struggles to find cash to stay afloat, local authorities say they oppose a government decision to use their reserves for short-term financing.

"The government's decision to seize our reserves not only raises legal and constitutional issues, but also a moral one," said George Papanikolaou, mayor of Glyfada, the third-largest municipality in the metropolitan region of Attica after Athens and Piraeus.

"We have a responsibility to serve our citizens," Papanikolaou said by phone on Monday.

Glyfada has about 16 million euros in cash reserves, he said.

Running out of other options, Greek Prime Minister Alexis Tsipras ordered local governments and central government entities to move their cash balances to the central bank for investment in short-term state debt.

The decree to confiscate reserves held in commercial banks and transfer them to the Bank of Greece could raise as much as 2 billion euros ($2.15 billion), according to two people familiar with the decision.

The money is needed to pay salaries and pensions at the end of the month, the people said.

"It is a politically and institutionally unacceptable decision," Giorgos Patoulis, mayor of the city of Marousi and president of the Central Union of Municipalities and Communities of Greece, said in a statement on Monday.

"No government to date has dared to touch the money of municipalities."

The Athens city council and the union of municipalities and communities in Greece will convene Tuesday to debate the order, a press officer of the mayor's office said.

"Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece," according to the decree posted Monday on a government website said.

The "regulation is submitted due to extremely urgent and unforeseen needs."

The additional funding may be only enough to pay salaries and a 770 million-euro tranche owed to the IMF on May 12, the people familiar with the decision said.