Gov’t to ease Capital Controls for “new money”, but Greeks leery due to crisis trauma & tax office debtors-safari

There has been a lot of talk about lifting, easing, twisting or whatevering of Capital Controls but fact is Capital Controls remain in position to safeguard the stability of Greek banks. Mainly for one reason: lack of confidence on the side of depositors. Greeks may have adjusted themselves to cash withdrawal restriction of €420 per week and have increasingly switched to use of e-money. But the insecurity of 6 years economic crisis and financial and political turbulence sits deep in the Greek soul. A trauma.

Last year’s heralding of alleged plans to lift Capital Controls “in the first”, then “in the second quarter of 2016” have been dropped all together. Banks may have been recapitalized, but… the question about their stability remains especially among the average Joe Greek who does not have an army of consultants and economic experts to secure his savings.

So, the issue is clear: Capital Controls will not be lifted soon.

At the same time, the banks do what they can to have the so-called “new money” to return in form of deposits. “New money” is the 500-euro and 100-euro banknotes in private safes, under mattresses or in flower pots, hidden by concerned depositors who withdrew their money in the last years and especially between December 2014 and 29. June 2015, when the restrictions were imposed.

Banks keep calling their customers offering what they call attractive interest rates for new money: 0.90% -1.30% when the average is around 0.50%. Attractive incentives? Well, they should come up with better deals.

Now, the banking system called the heavy gun at stake, governor of Bank of Greece, Yannis Stournaras. He promised to ease capital controls for those bringing new money to the banks.

“We want to give people an incentive to take the money they have in their apartments and deposit it with the banks,” Stournaras told German daily Handelsblatt in an exclusive interview and praised “Greek banks are stable and have on average a Tier 1 core capital quota of more than 16 percent, one of the highest quotas in the entire euro zone.”

Stournaras did not elaborate what exactly the incentive will be, for example whether the €420 weekly withdrawal cap will be raised to €480, €500 or €600.

A day earlier, on July 5th, Finance Minister Euclid Tsakalotos also spoke of “easing capital controls for new money.” Speaking to state broadcaster ERT, Tsakalotos said that “the new money can be withdrawn if it will be used for investment.” He underlined that the Capital Controls have been eased anyway adding “every month we liberate the capital controls regime, we have decided to facilitate exporters, first of all.” The Finance Minister said that they are working on the new regulations that might be implemented as of next week.

Tsakalotos estimated that the lifting of capital controls may take place after the second Program Review that is expected to start in October.

Greek Banking Union President Louka Katseli who had said something in the direction of easing capital controls some ten days ago.

So, the state and the banking sector have smitten is one plan and one joint  campaign that runs under the slogan:

“Empty your secret safes, bring the money to the bank”

But Greeks have been reluctant. And you cannot blame them.

“What if they grab it from my bank account?” a friend asked. She had managed to withdraw an X amount of euros from the bank account before the Capital Controls were imposed, so in a period of six months. She keeps this amount untouched like the Holy Grail. “How can I trust the Greek government, the Schaeubles, the EU?” Her question is justified.

Another friend who has also an amount of euro banknotes under the mattress says also that he does not trust anyone. His questioning is on the same wave length like of the other friend. “When I read that the state can grab your money for whatever reason even for a debt of 500 euro, when I think of new austerity measures that keep coming, of companies that collapse and people getting unemployed. The economy does not improve… Things can get worse at any time, so I’d rather sleep with the money under my pillow,” he explained.

Tax Office needs €5 billion till end of 2016

In Greek media today there are reports that target of the Finance Ministry is to implement “enforced collection measures” via seizure of bank accounts and assets, auctions of properties etc of at least 52% of arrears in taxes and social security contributions and that this target is to be reached by upcoming September. That’s a shock even to those who do not have other debts to state except their usual income tax and the Unified Property Tax that will be collected again by end of summer. Greece’s cash registers need to be filled with 5 billion euro until the end of 2016 in order to avoid the implementation of the automatic measures mechanism as required by the creditors.

Data referring to arrears collection Januar-April 2016, released by the General Secretariat of Public Revenues show a sharp increase in seizures of bank accounts, assets and properties, in the next weeks and months the efforts collection will be intensify with more foreclosures and auctions.

• Seizure of bank accounts of about 430,000 debtors. Compared with the same time last year, this figure has increased by about 30%. Based on these data, there are some 100,000 bank accounts seizure every month. 

  Tax authorities published 8,706 auction programs, signed 9,810 confiscation orders, took under mortgage 1,701 properties and  brought 2,339 criminal charges against debtors. 

  Seizures and other enforced collection measures and the partial repayment arrangements brought in the state cash registers 1.6 billion euro.

According to Capital.gr:

• The state can proceed with property seizure even for a deb starting with €500.
• Enforced collection measures can be activated for a debt “even from the first euro.”
• A bank acocunt cannot be seized if it has a balance lower than €50.
• To protect taxpayers’ minimum living standards, the tax office does not  seize part of wage or pension to up to 1,000 euros. For the part between 1000-1500 euro the tax office may confiscate 50%, but 100% for amounts above 1,500 euro.ion or drawn more than 1,500 euros may confiscate 100%. Taxpayers can register one bank account as “unseized” to a limit of 1,250 euro.
  

The goals of the Greek Finance Ministry until the end of the year clear: collect €1.3 billion from debts in social security contributions, €3.7 billion in old tax debts, €1billion from “big debtors” and also these year’s taxes.

Given this Tax Office Safari, do you believe that lots of Greeks would bring their “hidden” money to the banks?

New Money in Greek banks? The banking system and the state have to come with better ideas and incentives. The interest rate should be at the level to offset the depositor’s risk and to give him an “income” that will give value to  bring the money to the banks. 

Otherwise… sorry, I don’t think so.

PS the father of another friend was convinced by his bank and brought 2,000 euro “new money” from the kitchen cupboard to his bank account. We got an investor! wow.