Greek banks are calling for a partial lifting of the capital controls, which serve as a major disincentive for account holders to return the cash they have hidden under their mattresses or in safe deposit boxes – estimated at over 30 billion euros – to bank accounts to boost the credit system’s ever-decreasing liquidity.
The main disincentive is that if they do return that cash to their accounts, they will still only be able to withdraw 60 euros per day or 420 euros per week. Cash in the bank these days is seen as trapped due to the capital controls, meaning that no one wants to put their stashed funds there even if that cash is absolutely legal. That means the banks cannot expect deposits to grow. On the contrary, their sum continues to decline due to citizens’ need to pay their taxes, a trend that has culminated in the last quarter of the year.
People are covering a part of their tax obligations with the cash they have at home, which has also been supporting private consumption to a great extent in the last few months. There are many who would prefer to return their mattressed funds to the banks but are discouraged by the capital controls, so instead they use them for their day-to-day needs, which explains the reduction in the outflow from banks for tax payments that would have normally been greater.
Banks say that if customers were able to withdraw 10, 20 or even 30 percent of the cash returned to bank accounts (as is the case with money from abroad which is put into Greek bank accounts), that would be a great incentive for the return to the system of some of the funds withdrawn in the first half of the year owing to the major political uncertainty. Today Greeks can withdraw up to 10 percent of the money they place in a local bank from abroad or from the liquidation of investments. This is deemed “new money.”
Banks are therefore asking for the withdrawal limit to be increased to 500 euros per week, along with a monthly limit of 2,000 that could be withdrawn in one go. They are also asking for unconditional access to time deposits and for the bar on opening new accounts to be lifted.