No capital controls on ‘new money’

14 May 2016
532 Views

Separating “new money” flowing into Greece’s recapitalized banks from older deposits and excluding the former from capital controls has emerged in Brussels as a preferred course towards restoring normalcy to the country’s banking sector.

The measure had been a standing demand by Greek banks since capital controls were imposed in late June 2015, after the Tsipras government declared a snap referendum on an austerity package offered at the time by creditors.

Ever decreasing access to ECB liquidity by Greek banks had practically dried up credit lines in the country in the period immediately before a collapse of negotiations between Athens and its creditors in June.

Banking sources told  that a successful conclusion to the first review of the Greek program (third bailout) and a lifting of restrictions on new deposits would provide an incentive for domestic depositors to place their cash in local banks.

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