Greece is to take a substantial step towards easing capital controls – restrictions associated with the worst days of economic crisis – as it prepares to exit its current bailout programme.
Signalling that confidence is gradually returning to the country’s banking system, the leftist-led government has doubled the amount depositors will be able to withdraw from their accounts as of Monday.
“As is usually the case with the economy, this is about psychology,” said a senior official at the Bank of Greece. “The relaxation is as much about boosting confidence among investors and savers as showing banks can now afford to work under normal conditions.”
Barely three months before its third international bailout programme expires, the country once at the epicentre of the euro crisis is keen to prove its financial turmoil is over.
Under the new rules, the limit on cash withdrawals from local banks will be raised from €2,300 to €5,000 per month.
Business transactions will also be facilitated, with cash transfers abroad being doubled to €40,000 a month. The Greek finance ministry said it had similarly decided to increase the amount depositors can take abroad, in euros or foreign currency, from €2,300 to €3,000 per trip. From 1 July, banks will be allowed to accept customer orders for money transfers overseas for up to €4,000 bi-monthly.
In a statement the finance ministry said the aim was to fully lift restrictions “as soon as possible” while ensuring macroeconomic and financial stability.
The move follows Greece’s euro area creditors and the International Monetary Fund failing this weekend to crack the conundrum of easing the nation’s staggering €320bn debt pile at a G7 meeting in Canada. Athens is hoping for a solution for what is widely seen as its last remaining obstacle to economic recovery before it returns to “post-bailout normality” on 20 August.
“The easing of controls is indicative of the normalisation of the economy and of the country,” Stelios Kouloglou, a Euro MP with the governing Syriza party, told the Guardian. “The only thing that remains is for Germany to respect its own engagement and agree to debt relief, which it appears not to want to do due to internal political reasons.”
The controls were first imposed in June 2015 after Greece skirted perilously close to crashing out of the euro as fears of a bank run mounted amid global market jitters.
The turmoil led to the country receiving €86bn in emergency rescue funding – its third bailout since May 2010 – in August 2015 with the aim of tackling economic imbalances, social challenges and paving the way to sustainable economic growth.
Greek banks are still encumbered by high levels of non-performing loans although non-performing exposures dropped by 4.8% – the highest quarterly reduction since the onset of the crisis – over the fourth quarter of 2017. The Greek finance minister Euclid Tsakalotos has sought to allay fears that Italy’s financial turmoil will adversely affect Greece’s return to borrowing markets and long-desired normality. “Markets know that the Greek economy is doing well and its prospects are excellent,” he said last week.
Rather than be a cause for fear, events in Rome validated Athens argument that debt relief was crucial if Greece is to successfully access markets again, Tsakalotos insisted.