Almost a year after it imposed capital controls in Greece, the government – in association with the central bank and European authorities – is about to take the first major step toward relaxing them. Sources say that the technical groundwork has been completed for full freedom to be given to “new money,” i.e. deposits being returned to the local credit system, and to importing companies.
Senior bank officials say that this will be the first substantial move to reduce the capital controls, which is necessary for the restoration of confidence, improving liquidity and getting the economy on a positive course.
The government’s aim is to relax the capital controls shortly after the European Central Bank reinstates a waiver for Greek bonds exempting them from the rule preventing junk-rated state bonds from being used as collateral for the supply of cheap liquidity to commercial banks. That is expected to take place at the ECB’s June 2 board meeting.
The new measures will allow all cash to return to the banking system (from safe deposit boxes, mattresses etc) to be free from any controls. Bank officials say this will strengthen confidence considerably and create a serious incentive for the return of deposits that had left the credit system.
In the period from November 2014 to June 2015, when the capital controls were introduced, deposits shrank by 42 billion euros, of which some 30 billion is believed to have been taken out of the country. Banks now expect part of that money to start trickling back into the local system, with the flow growing as the controls are relaxed further and the climate of trust is consolidated.
Exceptionally important for enterprises will be freeing up most import companies from controls, as it is currently very difficult to make payments outside the country in excess of 10,000 euros, in terms of the red tape involved and the time required. The government intends to free up transactions up to 50,000 euros from the need for approval, according to sources.