Euro zone bailout fund to analyze 1.2 billion euro refund to Greece

By Jan Strupczewski BRUSSELS (Reuters) - The euro zone's bailout fund will discuss on Wednesday the possibility of returning to Greece 1.2 billion euros in bank recapitalization funds, euro zone officials said. If the board of directors of the European Financial Stability Facility (EFSF) approves the transfer, it would be a welcome financial shot in the arm for the Greek government, which is quickly running out of cash. A source familiar with the state of Greek finances said on Tuesday Athens will be out of money by April 20. "Eurogroup President Jeroen Dijsselbloem has asked the EFSF to provide an analysis of the matter. Also, he has asked the chairman of the Eurogroup Working Group to take the issue up at short notice," an EFSF spokesman said. Greece believes it should get the 1.2 billion euros back because it says it paid this amount from a cash reserve of its own bank stabilization fund, the Hellenic Financial Stability Facility (HFSF), to recapitalize Greek banks. The recapitalization was done in cash under the previous government of Antonis Samaras even though the HFSF still had 10.9 billion euros in EFSF bonds it could use for the purpose. The new government of Alexis Tsipras, cut off from markets and desperate for revenue as debt repayments loom, would like to reverse that decision, use some of the remaining available EFSF bonds to recapitalize banks and take back its cash, which it could then use for other pressing needs. The decision rests with the EFSF board, because the bonds earmarked for Greek bank recapitalization were transferred from the HFSF back to the EFSF in February. The EFSF board will discuss the legal aspects. Some euro zone officials said the Greek request had some merit, but others said it was not clear cut. "Hard to say, it could happen I guess," one euro zone official said about the possibility of Greece getting the cash. However, another euro zone official said the Greek case was "unfortunately legally not sound". (Reporting By Jan Strupczewski; editing by Robin Emmott and Paul Taylor)