Greek Prime Minister, Kyriakos Mitsotakis on 26 August signalled a new era for the country when he announced in the parliament that restrictions on the free flow of money would be completely lifted as of 1 September, 2019.
His announcement was hailed by the domestic business sector and private citizens alike, as it was a clear sign of a return to economic normalcy, while raising realistic expectations that the crippling effects of the long-standing measure would be gradually reversed and pave the way for the onset of regular business activity with a properly functioning banking system.
Neos Kosmos sought the perspective of three people, two entrepreneurs and a journalist to explore how the decision would affect business activity and the economy as a whole.
Greek Australian collaborations
Panos Athanasiou is the Executive Director of Adelco Pharmaceutical Australia, an affiliate of Adelco Greece, a company dealing in the provision of health and cosmetics solutions. Reflecting the majority of views in the market, he also underlined the importance of the move, saying that it would boost capital flow and the chance for business collaborations.
“I believe that the most significant benefit of the total abolition of capital controls is the improved evaluation of the country on a financial level, as well as its banks, elevating its investment tier prospects, which will make it more appealing to institutional investors and also help banks and businesses have access to significantly cheaper loans,” he told Neos Kosmos.
As Mr Athanasiou explained, following the full lifting of the capital controls, there was a notable rise in interest in possible collaborations between Greek and Australian companies in the line of his business, Pharma and cosmetics, almost immediately.
“Indeed, there is an increased interest for synergies, and it is no coincidence that as far as the Australian market is concerned, we have received invitations and have already scheduled meetings for the immediate future that were obviously related with the positive news of the lift.
“The Greek pharmaceutical industry has always had a strong potential for expansion and cooperation with large companies overseas, including Australia, despite Greece’s crisis and capital controls,” he added.
Apart from all the practical benefits, like the ability for companies and entrepreneurs to have easier access to cheaper loans, Mr Athanasiou pointed out that the move would result in a boost in the psychology of market investors, shareholders and companies collaborating with Greek businesses.
The views of Mr Athanasiou echoed the overall positive sentiment that followed the announcement, with the Greek Exporter’s Association (SEVE) issuing a statement saying the decision to completely do away with capital flow restrictions would “lead to a new era for Greek exports, as well the realisation of new investments” and that the decision “lifts a significant burden on the credibility and the prospects of the Greek economy”.
READ MORE: Greece to fully lift capital controls, ending restrictions to transfer money abroad
Leaving the 3rd world
Unsurprisingly, the news drew international attention with media outlets across the globe lauding the move, as it was seen as one more sign, possibly the most vital one, on the path to total economic recovery, which would make Greece a more attractive prospect for institutional foreign investors.
Vasilis Stefanakidis, Managing Editor and a pundit on economic issues at one of Greece’s leading newspapers, Proto Thema, highlighted the powerful symbolism it brought.
“It restores the country in the eyes of the markets and reintroduces it to the ‘normal’ countries,” he told Neos Kosmos.
“It places the country back on the radar of prospective investors who, let’s not kid ourselves, judged this [capital controls] as a negative factor, along with, of course, many other shortcomings still present in the country, in dealing with prospective investors.”
In relation to day-to-day, normal transactions and activities for people, Mr Stefanakidis says that after four years of “Greeks feeling like citizens living in a third world country and suffering the bureaucratic ‘monster’ to send remittances to their children studying abroad, or patients who had to be treated overseas, as well as simple tourists who were only allowed a limited amount per trip, they feel relieved today.”
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He stresses that the decision did not “magically” solve all the inherent problems plaguing the Greek economy, but acknowledges the positive impact of the full abolition of capital controls and that the move is an important step in the right direction on Greece’s path towards economic recovery and a final exit from the crisis. Something, as he says, confirmed by the reception in the money markets as the Greek state yields fell to all time lows.
“This is why, the markets, which constantly have us [Greece] under their microscope, have recently rewarded the Greek economy, placing Greek government bond rates at historically low levels and reinforcing the Greek government’s efforts to negotiate with its lenders to reduce its excess deficit target of 3.5 per cent of primary surpluses and give a boost to growth.”
Following the announcement, credit ratings agency Moody’s estimated in a report that the removal of capital controls would “strengthen confidence among depositors and help banks improve their financial profile and revenue” leading the agency to issue a credit positive prospect on Greece.
Economy is psychology
The tourism industry is one of Greece’s key economic sectors contributing substantially to the country’s balance of trade while offering employment to thousands of people.
Giannis Theocharis, a hotel owner in Mykonos and the President of the Association of Hospitality and Catering, says the effects of the lifting of the capital controls can only be positive, as “it creates conditions suitable for entrepreneurs who want to invest.”
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“Economy is psychology,” he says, adding that “for any investor in the times of globalisation we live in who wants to invest, conditions for economic growth must be favourable. It is, therefore, reasonable to have free movement of capital which in turn creates conditions for investment and growth.”
Mr Theocharis adds that the free movement of capital would release the market forces, making Mykonos and other Greek islands more appealing for investors wanting to take part in the construction of necessary infrastructure projects like marinas, etc.
The decision by the Greek government to abolish all capital controls was undeniably a move in the right direction, as the majority of reactions from all quarters testify. A move that will reinstill optimism and restore a sense of hope in the battered country and its despondent citizens.
However, it is just one action. It should not be seen as a panacea for the country’s, almost perpetual it seems, ailments and inherent shortcomings.
If the government fails to couple the move with a multi-pronged approach in addressing the serious flaws the economy, and dare I say, society itself, are laden with, then it might prove to be just one more unavailing tool in the quest to grasp that ever elusive chimera of recovery – in the economy and society. Reform is the vital word. But that is for another day…