Greece Loosens Capital Controls, Business Investment Rises

Greece has loosened restrictions on capital flows for businesses, allowing companies to import more into the country.

In a sign of a return to normalcy, the Greek government has loosened capital controls that limited money transfers abroad. That restriction caused imports to grind to a halt, as limits on remittances caused importers to postpone shipments when they did not receive payment.

Greece has loosened restrictions on capital flows for businesses, allowing companies to import more into the country.

In a sign of a return to normalcy, the Greek government has loosened capital controls that limited money transfers abroad. That restriction caused imports to grind to a halt, as limits on remittances caused importers to postpone shipments when they did not receive payment.

The controls, which began on June 29, caused many companies to postpone shipments, although a few foreign suppliers circumvented the controls through IOUs and accepting postponed payments for goods and services deliveries. However, some companies refused to accept IOUs, causing fears that supplies of essentials would dry up in the country.

Now, businesses may to transfer 100,000 euros out of the country, above an earlier restriction of 50,000 euros that caused delays to large shipments. According to Greek Central Bank Governor Yannis Stournaras, the higher limit will cover nearly 70% of all business payments for foreign businesses.

Stournaras also told reporters that the higher capital controls and a widespread return to normal operations was helping business conditions improve, and pending concerns regarding import payments would be resolved in the next 10 days.

“As far as approvals are concerned, we are now very close to the monthly imports the Greek economy was registering before the crisis,” he said.

Shipping companies may withdraw up to 50,000 euros per day, higher than the previous limit.

Stock Market Reopening

Greece’s stock exchange remains closed for nearly a month, but according to AFP there are plans to reopen the Athens Stock Exchange “in a few days,” although the exact timing remains unclear.

The market has remained closed since June 26 although derivatives and foreign exchange traded funds have continued to fluctuate in value, approximating market expectations for the market when it reopens. The Global X Greek ETF has risen 1.8% in the last month, although at one point the fund rose 18.5% in value. The fund has since erased those gains, but has eked out a small gain in recent days after a sharp correction.

According to the AFP, the European Central Bank has approved reopening the stock market, and the Greek government is finalizing the process before it reopens.

Brain Drain Fears

While Greek equity markets have halted, many commentators express concerns that the persistently high youth unemployment, which has remained over 50% since the crisis began in 2010, is encouraging Greece’s top talent to leave the country and look for work elsewhere.

Lower barriers in the labor movement throughout the European Union have accelerated the exodus, leading to fears of brain drain in country. The Greek government estimates that about 3% of the population, mostly people under 35, left the country since 2010 in search of work elsewhere.

Some analysts say the rate of emigration has accelerated in recent months, and the resolution to the most recent debt crisis has given young Greeks little solace in the future of their labor market.