The
Hellenic stock exchange opened today after five weeks with a drop in the
opening session of 23% with banking stocks taking the heavy losses. The stock
exchange limited losses and closed with a drop of 16%. The banking sector
suffered losses of 29.9%. The stock market opened following the massive outflow
of deposits from the banking system, closing of the banks, the implementation
of capital controls, and with banks open
but with limited operations, and capital controls in place.
Despite
this and due to the agreement reached last month in the Euro group summit
meeting between Greece and the EU, on the debt, the Greek government past two
prerequisites laws, as required, in order for the negotiations with the Troika
to resume. Indeed, after the passing of the two laws, and the government
suffering losses in both legislations, but having the support of the opposition
parties, past the laws, and negotiations with the Troika have begun this week.
As
a result of the passage of the two prerequisite laws, the ECB released
additional financing to the Greek banking system, through the Emergency Loan
Assistance. This allowed the banks to open, but with restrictions on withdrawals.
This has had an impact on businesses involved with exports, as well as
businesses having problems with imports. Containers have piled up in ports with
business people being unable to pay for raw materials. Greece also received
financing to meet its delayed payment to the IMF, and fulfilled its obligation
to bondholders by paying off the ECB (next payment due August 20).
Negotiations
with the Troika have been focused with the immediate abolishment of early
retirement, collective bargaining agreement, layoffs, and changes in the way
farmers are being taxed. Tomorrow the
talks will focus on privatizations (creating a fund of 50 billion euros in
assets), recapitalization of the Greek banks (projected amount ranges from 10 to
25 billion euros), and bad loans. The governments’ target is to close the
agreement on August 20.
Greek
banking sources said last week that depositors have slowly returned to the
banks depositing small amounts up to 10000 euros. Reuters is reporting that the
Bank of Greece will not ask the ECB for additional funding through the ELA.
This is due to the ECB’s liquidity assistance as well as the cushion provided
by depositors as small amounts are returning gradually to the system. ELA’s
assistance stands at 91 billion euros.
