Things for insolvent, cashless Greece are - not unexpectedly - getting worse by the day.. 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 tomorrow 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.. And Bloomberg just reported that the ECB would add insult to injury and may increase haircuts for Greek banks accessing Emergency Liquidity Assistance, thus "reining in" the very critical emergency liquidity which has kept Greek banks operating in recent weeks as the bank run sweeping the domestic banking sector has gotten worse by the day.. ECB staff have proposed increasing the discounts imposed on the securities banks post as collateral when borrowing from the Bank of Greece, the people said, asking not to be named as the matter is private. While adjusting these so-called haircuts hasn’t been formally discussed by the Governing Council, it may be considered if Greece’s leaders fail to quickly convince euro-area finance ministers they can reform their economy and secure bailout funds, one of the people said. Greek bank stocks slid.. According to Bloomberg, the ECB staff proposal lays out three options to reduce central-bank risk: "the scenarios envisage returning haircuts to the level before late last year, when the ECB eased its collateral requirements for Greece; to set them at 75 percent; or to set them at 90 percent. The latter two options could be applied if Greece is in an “orderly default” under a formal ECB program or a “disorderly default,” CNBC said, without further elaborating on those terms".. Any reduction in ELA availability would be devastating to Greece, where depositors continue to pull cash from banks accounts to the tune of several hundred million euro every week, and the central bank "seeks to match the outflow with ELA. The Bank of Greece keeps a buffer of around 3 billion euros of ELA allowance in reserve, to give it time to react to a possible bank run, one of the officials said".. Any reduction in this buffer would lead to a self-fulfilling bank run prophecy and accelerate the deposit flight to the point where the local banks are forced to halt operations, and Greece is forced to replace the "soft" capital controls already rolled out with "hard" ones.. To restrict or veto ELA funding, which is provided at the Greek central bank’s own risk with consent from Frankfurt, a two-thirds majority of the Governing Council is necessary. A growing minority is opposed to continuing to provide the assistance indefinitely, one of the people said.. And while the date of the next ECB governing council is May 6, Greek government bonds just tumbled to a record low...