The Bank of Greece and European authorities are taking the first big step to ease capital controls that were first imposed on June 18, 2015, prior to the agreement of a third bailout deal between Greece and its creditors. Technical groundwork has been laid for “new money” entering the domestic banking system, such as deposits returning to the credit system.
A relaxation of capital controls will allow cash to return to banks from hiding places and safe deposit boxes. Bank officials believe that an easing of capital controls would help bring back confidence to the market following the shrinkage in deposits by 42 billion euros from November 2014 to June 2015 when the capital controls were introduced.
The European Central Bank will reinstate the waiver to allow Greek banks to switch part of their borrowing from the Bank of Greece to the ECB for cheaper funding. A banker told Reuters that the ECB Governing Council is likely to make this decision during its board meeting on June 2 in Vienna.
The government hopes to relax capital controls shortly after the reinstatement of the waiver.
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