A quick end to Greek capital controls? Economists don’t think so

A quick end to Greek capital controls? Economists don’t think so

Greeks should get used to restrictions on their money.

That’s the view of 81 percent of economists polled by Bloomberg, who said capital controls are here to stay until at least the second half of 2016. The sample of 16 economists was interviewed Oct. 9-16.

Greek government and bank officials have argued that the controls – introduced in June to limit ATM withdrawals and overseas transfers – can be lifted by the start of 2016, after Greece’s banks have been recapitalized.

“They’re too optimistic,” said Achilleas Chrysostomou, an economist at Standard Chartered Bank in London. “I think the European partners, the creditors, will want to see some more evidence of implementation of the program before they feel comfortable lifting the capital controls.”

The European Central Bank is set to announce the results of a review of Greek banks at the end of this month. This is likely to show a capital shortfall of 18 billion euros ($20 billion), with the vast chunk of that hole to be filled by the state-run Hellenic Financial Stability Fund, according to the survey.

Prime Minister Alexis Tsipras reiterated on Friday that the recapitalization needs to be completed by the end of the year, before new regulations come into force that would require depositors to be bailed in as part of the process before euro- area rescue funds are used.

Economic impact

The impact of capital controls on Greek economic activity means gross domestic product will contract 1 percent in 2015, according to economists in a separate Bloomberg survey.

While that’s a deeper contraction than the 0.7 percent forecast in July, it still reflects unexpected resilience in the second quarter, when GDP increased 0.9 percent. Greece’s bailout agreement, signed in August, forecast the economy would shrink 2.3 percent this year.

“The twin deficits in the government budget and external position have been resolved,” said Nicholas Magginas, an economist at National Bank of Greece SA in Athens, one of three economists in the survey who predicted controls will be lifted in the first half of 2016. “There is no need for a prolonged adjustment period under capital controls.”

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