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Yannis Stournaras
World Economy

Greece to Ease Capital Controls

Greece will soon ease capital controls further but full liberalization will depend on progress in easing the country’s debt burden, which is also a precondition for entering the ECB’s asset buying scheme, central bank chief Yannis Stournaras said.
Propped up by three successive bailouts, Greece hopes to emerge from a long recession next year. But much of its outlook depends on getting a long-sought reduction of its huge debt pile, easing capital restrictions and inclusion in the ECB’s 1.74 trillion asset buying scheme.
“We gradually lift capital controls and the next step will take place soon,” Stournaras, a European Central Bank Governing Council member, told Reuters in an interview. “The full lifting of capital controls is the end of the road.”
“To get there we need the finishing off of the second (bailout program) evaluation, discussion on debt measures and quantitative easing inclusion. Above everything else, it depends on how quickly full confidence returns.”
Stournaras expects the government to quickly conclude the second bailout review, opening the way for talks on debt possibly in December, setting the stage for the ECB to include Greece in its quantitative easing asset purchase scheme.
Debt relief has been one of the key sticking points. Germany opposes a move now, while the ECB and the IMF are both calling for an easing of the burden, possibly through longer maturities, lower rates on some bonds, and a smoother repayment schedule.
Stournaras made it clear that unless a serious discussion starts on debt, Greece will not be included in the ECB’s sovereign bond-buying program. Inclusion could give the recovery a major boost.
“QE depends on debt being sustainable. The ECB needs to have something concrete on debt measures before it performs its own debt sustainability analysis,” Stournaras said.
Although the ECB could only buy relatively few Greek bonds, inclusion in its asset purchases would underpin confidence and help Greece eventually return to the bond market.
“The secondary effects (of QE), which are confidence and symbolism, are more important than the buying itself. It’s a passport for us to enter markets again,” Stournaras said.
Cut off from global debt markets since 2014, Greece is anxious to regain market access before its current €86 billion ($93.64 billion) bailout program expires in 2018.
The International Monetary Fund has so far refused to put money into Greece’s third bailout on the grounds that financial targets are unrealistic without major debt relief. But Stournaras said it was unlikely that the fund would part ways with Greece.

 

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