Greek municipalities leave room to review refusal to lend cash to government

ATHENS (Reuters) - Greece's union of municipalities (KEDE) said on Saturday it would lend cash to the near-bankrupt state only if the government said publicly that their reserves would help solve the national liquidity crisis. Prime Minister Alexis Tsipras' left-led government has been seeking a deal with Greece's international lenders since it took power in January to unlock funds. It hasn't received any bailout aid since August. In a sign of how extreme the financial constraints on the government have become, in April Athens ordered state entities to park idle cash at the central bank. The measure, which was approved by 156 lawmakers in the 300-seat chamber, caused an outcry among unions and local administrations. KEDE said it stuck to a decision to defy the order because it needed more assurances that the money was safe and that reserves marked for the payment of specific projects would be exempted. But it left scope for an emergency meeting to reverse its decision. "We state categorically that in the event in which the government declares publicly that the country faces a problem and its resolution is linked with the municipalities' cash reserves, we commit that we will provide it immediately," it said. In such an event and "to save the country", mayors would also offer their wages and urge Greek politicians to do the same, the union said. Last month Greece's regional governors, who had originally opposed the order, agreed to lend cash to the near-bankrupt central government after Prime Minister Alexis Tsipras assured them the measure would last for only a short period of time. Greece hopes to get 2.5 billion euro ($2.8 billion) from state entities' cash reserves to cover any payment needs until end May. It has been tapping into such reserves through repo transactions. The order includes local administration but excludes pension funds and some state-owned firms. Cash reserves that are needed by these bodies for their immediate payment needs are also excluded from the regulation. Money that a public body does not need immediately is parked at the Bank of Greece, lent to the debt agency for one to 15 days against collateral and paid back with interest at expiry. ($1 = 0.8931 euros) (Reporting by Renee Maltezou and Karolina Tagaris; Editing by Ruth Pitchford)