Greek Banks Reopen after EU Deal

After three weeks of closed banks and capital controls, Greek banks reopened on Monday to little fanfare and much foreign scrutiny.  Greek banks opened and offered all banking services to customers, although capital controls remain in place. Greeks were limited to cash withdrawals of 420 euros per week, after 60 euro per day limits in place for nearly a month.

After three weeks of closed banks and capital controls, Greek banks reopened on Monday to little fanfare and much foreign scrutiny.  Greek banks opened and offered all banking services to customers, although capital controls remain in place. Greeks were limited to cash withdrawals of 420 euros per week, after 60 euro per day limits in place for nearly a month.

Although the banking system opened, Greek investors remained shut out of the local stock market, as the Athens Stock Exchange remained closed on Monday and the timeframe of its reopening remained uncertain. While one spokesperson cited the need for more regulation, some commentators suggested regulators want to wait for a calmer sentiment to stop a rapid sell-off of Greek stocks.

Further Concessions

While the Greek financial system eases into normal operations, German policymakers have signaled intentions to offer a more generous bailout package to Greece in the form of debt concessions and emergency liquidity. In total, the Eurozone has pledged an 86 billion euro debt relief package, and further bailouts may be forthcoming.

However, the current debt relief is dependent upon several concessions which some economists believe cause growth to slow or even reverse in Greece, as they could limit overall economic growth. If so, those reforms could also be counterproductive by causing revenue to decline in nominal terms and make the debt load to foreign creditors harder to bear.

Nonetheless, the Greek ruling Syriza party has agreed to several taxation and spending reforms. Most important is the new VAT system, set at 23%. The new rate will also apply to tourist destinations, which had been exempt from the VAT in the previous program.

The EU has also insisted Greece raise its corporate tax rate, which some conservative economists worry will lower growth as it pressures companies from innovating and creating jobs.

Additionally, and far less controversially, the Greek government will reform pension plans and liberalize the labor market by reviewing collective bargaining agreements and regulations and curbing early retirements in the public labor force.

“Humanitarian Crisis”

The Greeks refer to their situation as a humanitarian crisis and several outsiders, including former finance minister Yanis Varoufakis, who resigned recently on signs that the Greek government would consent to belt-tightening austerity demands from Germany.

Greece’s economy has shrunk over 20% since 2008, while youth unemployment has eclipsed 50% and total unemployment nears 30%. Nearly 40% of Greece is in or at risk of falling into poverty, with over 30% living in extreme poverty. Some social workers warn that these people are at danger of starvation or severe illness, because of Greece’s traditionally weak welfare system.

In Greek hospitals, severe cuts to basic medicines and access to medical care occurred, with some Greeks facing longer illnesses and even death because of the cuts. A 2014 study in The Lancet concluded that there was “mounting evidence of a Greek public health tragedy.”

Homelessness and drug use have also been on the rise, with many well-educated Greeks leaving the country to pursue careers. Migration to Greece has turned negative after averaging around 0.3% before 2008, and has fallen to over 0.6% in 2014.