Greece: less constraints on Capital Control
On 1 October of this year part of the limits imposed on the transfer of capital abroad by the Greek government in 2015 expired. This is an encouraging signal for the future prospects of the Greek banking system, and an opportunity for foreign companies with economic relations with Greece.
Around 10 years have now passed since the explosion of the economic crisis that shook the global financial markets and, even though all major economies have more or less suffered from its effect, in some countries, where there was a greater debt exposure and significant structural issues, the crisis has caused more severe consequences. Greece was certainly the most emblematic case in Europe.
The loss of trust by investors and the threat of having to leave the Eurozone generated huge outflows, with a harsh impact on the stability of the Greek banking system. It is estimated that, between 2010 and 2015, around EUR 80 billion of capital left Greece. In this scenario, the government was compelled to introduce capital control measures. The first provisions came into force in June 2015 and imposed, among other things, a strict regulation governing the transactions towards foreign countries and a maximum withdrawal from credit institutions of EUR 60 per day (EUR 420 per week).
The impact of these measures on the Greek industry was significant, as even those companies that had not up to then suffered the effects of the crisis found themselves unable to pay their suppliers abroad, so incurring into supply problems. Operations that included cross-border transactions had to be approved by special committees, which had the power to authorise transactions following daily limits which were updated frequently by the regulatory authorities. The effects of the provision therefore also impacted on healthy industrial sectors, so worsening the country’s socio-economic situation. In the following months the Greek government intervened several times to modify the regulations, making access to capital progressively more flexible.
Following the exit from compulsory administration, Greece started a gradual process of abolition of the limits.
Since 1 October of this year companies operating in the country have benefitted from a relaxation on the measures which allows the execution of transactions up EUR 100 thousand per client per day to be conducted with the application of the necessary documentation (e.g. invoices) along with a sole declaration that the same transaction has not been filed to another Bank. Operations over EUR 100 thousand still have to be approved by special committees. Furthermore, starting from 1 October the possibility to transfer abroad 100% of invested capital, dividends and profits is provided without any restriction. This applies to all capitals invested in Greece after the legislative act went public on September 28th of 2018.
This provision will certainly have a positive impact also on companies in other countries, including Italian ones, that have historically had extensive commercial relations with Greece.
In spite of the fact that the Greek economic situation is still problematic in many ways, these positive signals, together with an increase in GDP of 1.3% in 2017 and, according to forecasts, of up to 2% in 2018, give reasons for some optimism on the prospects of recovery and the country’s industrial relations.