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Greece to lift capital controls for those who bring money back to banks

The Greek authorities will try everything to get back to the banks what depositors withdrew before the capital controls were imposed on June 29th 2015. The financial ministry and its high-ranking state officials and interim government ministers are determined and will try everything to get the money back to the banks all the euro cash hidden under mattresses, in closet private safes or planted in terracotta flowerpots.

And when stick does not move money, maybe the carrot will. In this case the carrot is in form of incentives like bypassing -or better say “partially lifting of” –  the capital controls. But only for amounts that have been returned to the banks or apparently have been newly brought to the bank.

Money to the Banks – No capital controls

Several Greek media reported today that the Finance Ministry and the Bank of Greece with the approval of the European Central Bank consider to give incentives to those who will bring their money back to the banks, even though the press reports do not specify the amount of money the measure will affect.

One of the most important regulations is the possibility for citizens who deposit cash in savings or current deposit accounts that they will be able to withdraw the amount they will deposit at any time and without the weekly restrictions of the capital controls.

The money will be deposited in existing accounts of depositors and it will possible to separate the new amount from the old balance of the account through a special software that has been invented for the banks. Then the amount currently on the deposit account will remain under the restrictions of the capital controls.”

According to economic news website, the relevant decision is expected to be signed by the interim finance minister Giorgos Chouliarakis in the next few days.

The decision will contain also other ways to ease the capital controls, for example, for depositors -private and legal persons – who want to buy a real estate or they want to withdraw up to €1,800-2,000 per month to cover their monthly like medical expenses, accommodation, school fees etc. The option to  transfer 500 euro per month to a bank account abroad without bank and/or other documents will be also possible. Lifting of some restrictions will affect also businesses and students abroad.

Our Holy Greek banks need M-O-N-E-Y

Greece but also the country’s lenders are more than keen to have deposits return to the banks with the banks stress tests expected to conclude by end of the month and the upcoming recapitalization to be estimated to cost €13-€15 billion.

The plan to lure Greek deposits back to the banks was on the Eurogroup table already in August, with Jeroen Dijssebloem to urge for a bail-in shield to protect depositors and small and medium enterprises with up to 100,000 euro in their accounts and then Greek FinMin Euclid Tsakalotos to cheerfully herald:

“By shielding deposits, account holders won’t have “anything to worry about. The process of reversing the negative effects of capital controls will start very quickly and will speedily return the banks to where they were before and hopefully on a far firmer footing.”

Deposits interest rates on sharp decline since capital controls

But why should Greeks bring the money they have withdrawn out of fear of capital controls and bail-in and bank collapse back to the banks?

Just to be able to withdraw it again?To secure it against lurking thieves?

Everyone who has recently paid a visit to a bank has been literally shocked to hear that interest rates for time deposits was just 0.75%!

Interest rates for deposits dropped sharply after the imposition of capital controls for the benefit of the banks, of course.

Interest rates for -one-month deposit was 1.70% in May, 1.35% in June and 1.30% by August 19th. In September the Greek banks decided unanimously to further cut the interest rates and pushed them further down to just 0.75%.

“Reducing the cost of money gives some breathing space to the banks, which appear to save a portion of the damage they suffered by the increased cost of bad debts after the imposition of capital controls,” notes economic news website on August 19th.

Bad bank & bad ethics

A neighbor was telling me the other day that an employee at a well-known bank tried to hinder him from extending her deposit for one month. The incident occurred in the third week of August and the bank employee told him “as if she was giving me a very secret advice, ‘why do you want to extend, why don’t you wait, there will be elections in a month, so let’s see what will happen after the elections.

The man got kind of confused, he assumed that the bank clerk knew better and was to take care of his money, so did not proceed with the extension. At this time the deposits interest rate was at 1.30%

The man was deprived of some 100 euro gross (as 15% will be automatically booked to the tax office), but the bank employee was probably proud to have saved the bank whole  85 euro!

Anyway, the Greek banks joint decision to keep deposits interest rates ridiculously low does not give any options and choices to depositors though. So why should depositors bring their money back to the banks, when they may receive 0% but they can grab their money whenever they want.

Deposits interest rates: one month

September 2014: 1.8% – 2+%

September 2009: 3.5%- 4+%

The ongoing political and economic instability and in addition the capital controls and the “I don’t know what will happen next” insecurity hinders quite some Greeks from regain their trust to the banks.

Money to the banks? No, thanks.

“Why should I bring my money to the bank,” a friend told me “they are safe where they are.”

“Bring my money to the bank? HA! How can I know it will not automatically turn into Drachma one day?” said another one.

A third friend told me that she will never ever extend the deposit where the family has its life-savings “for the bad times.” The month’s interest rate was a whole of 11.20 euro. “It is not worth the time I spend to go to the bank, no worth the many papers I have to sign,” she said and added a niceness of the kind of “Screw the bank!”

Tax the money under the mattresses?

But neither the state nor the lenders will allow Greek depositors sit quietly on their euro cash at home. End of August alternate interim minister Tryfon Alexiadis had warned Greeks that they will have to tax also the money under the mattress and that this money will have to pass through the banking system.

Former deputy chairman of the taxmen union Alexiadis (SYRIZA) said that “all citizens in 2015 will have to pass their money through the banking system in 2015, if they want to avoid future additional taxation.

Taxpayers who will declare that they have cash at home will have to deposit the money in the bank, if they want to use this amount in their tax declaration to cover living cost and deemed income. If they won’t do that, they will not be able to justify expenses and will pay additional tax.”

I could explain exactly what the ex taxman was trying to say but I refuse to be the interpreter of some government officials who are able to produce only confused political wording.

Tax Authorities in full control of deposits

Anyway, while they all want to have Greek money back to Greek banks, the  Finance Ministry announced that as of the next days the tax authorities will have full access to bank deposits and accounts and it will be authorized to make controls of account movements of the last 10 years.

The aims is for one more time: to catch tax evaders. The Big Fish, that is. Greece mission impossible, as usual.

Why haven’t they manage to have big fish slip in their net? Probably because they get lost in the amazingly complicated and irregular network of regulations and paragraphs they produce in a state of confused mind marked by panic and overreaction.

PS Bring money back to banks on 0.75% interest rate? And the idiots who left their money at the banks will still be subject to capital controls? No kidding? Seriously?

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