Closing summary: Greece re-opens banks and pays off some debts
People stand in line inside a bank in Athens today. Photograph: Socrates Baltagiannis/Socrates Baltagiannis/dpa/Corbis
Our main story tonight: Greece has taken a step back to normality after its banks reopened following three weeks of closures and receipt of a €7.2bn (£5bn) loan, with almost all of it spent on repaying debts.
After a quieter day by recent eurozone standards, a closing summary before we go:
Bank branches across Greece have reopened today, as the financial restrictions that have constrained the country for the last three weeks are relaxed, a little, following last week’s bailout deal.
The banking sector is still subject to capital controls, which mean people can’t withdraw more than €420 per week from their accounts, or transfer money overseas. Here’s a list of the restrictions.
Thanks for reading and all the comments. We will be back in the morning with the latest economic and business news from the UK, the eurozone and beyond.
On a day when the Greek banks opened their doors for the first time inthree weeks, the debate about future funding needs seems far away.But our economics correspondent Phillip Inman asks what lies ahead for Greece’s battered financial sector.
He writes:
Plenty of dangers lie in wait for Greek banks. Already short of cash, they may need lots more when stress tests of their solvency are carried out in a month or two.
And unable to access the international money markets, they will be in a similar position to the Greek god Telephus, who was wounded by Achilles and yet needed Achilles to return as a doctor before he could be healed. The Greek banks, stripped of many of their assets by the European Central Bank, will need the ECB to make a re-appearance in Athens to aid their recovery...
A couple of months from now, the story could take a grim turn. Not only will hundreds of millions of deposits have been withdrawn in that time, the weakening effects of a broader economic slowdown will have taken their toll.
European stock markets have closed higher as worries about Greece recede.
The main share indices have not managed to hold on to all their early gains but are still well within positive territory.
The Italian FTSE MIB has lead the way, up more than 1.1%:
European share indices. Photograph: Thomson Reuters
On government bond markets, the ebbing away of Grexit fears has also helped bring down yields in Southern Europe. Yields on Portuguese, Spanish and Italian 10-year government bonds are all lower.
Of course, the big move on financial markets today, as reported earlier, has been in the old safe-haven favourite: gold.
The gold price has fallen sharply as worries about the eurozone and wider global economy recede, for now. Photograph: Thomson Reuters
The gold price fell to its lowest for more than five years as the precious metal was buffeted by the deal to avert a Greek bankruptcy, a potential US interest rate increase and a sharp sell-off in China. It has since rebounded from a low of $1,088.05.
Laith Khalaf, senior analyst at Hargreaves Lansdown comments:
Gold has struggled against a backdrop of global economic recovery and a strengthening dollar, and the recent sell-off appears to have come on the back of the Chinese central bank reporting its gold holdings, which disappointed analyst’s expectations.
The yellow metal is traditionally seen as a store of value and a protection policy against catastrophe, both attractive features in recent years given the depth of the financial crisis and the devaluation of fiat currencies by central bankers cranking the printing presses. However those worries have receded, and with them so has the gold price.”
Here is our news story on today’s sharp moves for gold:
Bank of Greece vaults, where deposit boxes are kept Photograph: Helena Smith
Helena Smith has also been in the vaults of the Bank of Greece talking to Ioannis Zafeiropoulos, who has oversight of some 7,500 safety deposit boxes – held behind iron bars and huge steel doors. She reports:
An official at the bank for the past 31 years,Zafeiropoulos had spent 10 days drawing up a contingency plan. His worry: that once the banks reopened, the vaults might be stormed by savers fearing the country’s enforced ejection from the euro zone.
“How was I going to cope when no more than four people can be in a vault at the same time?” he asked. “I had to devise a plan but instead of 3,000 people turning up as I had thought we’ve had less than a hundred. We’ve been joking about how disappointing it’s been.”
All morning, he said, he had been asking himself why.
“People have behaved so responsibly, so maturely today,” said Zafeiropoulos. “And I think that’s because they have probably said ‘now that the banks have opened, they are not going to close again and what on earth will I do with the contents of a safety box? Where will I hide my money or my jewels if I do take them out?’” he murmured.
“This crisis is never going to end. Do the sums, see how much they say we owe them,” he said referring to the EU, ECB and IMF that have kept the country afloat “and you’ll understand it will not be ending anytime soon.”
A man leaves a branch of the National Bank of Greece in Athens today. Photograph: Thanassis Stavrakis/AP
The reopening of Greek banks may have been highly symbolic for the crisis-hit country’s economy but in many ways today has defied expectations. Our correspondent Helena Smith reports from Athens.
The opening of Greek banks on Monday was not without symbolism. After 21 days of being firmly closed, the sight of their shutters going up was uplifting both for Greeks and their debt-stricken economy - an economy that with the added restriction of capital controls has suffered immeasurable damage in the meantime.
“What economy can work without its banks?” asked Spyros Kouroumbiotis, a pensioner in the queue at the Bank of Greece waiting to pay his taxes. “As an economist I still help family with their business and I can tell you it’s been a huge ordeal. Exports have stopped, imports have stopped, nothing has worked because it’s been impossible to pay anyone.”
But on Monday it was the manner of their re-opening that surprised officials most. Quite quickly it became evident that the panic-stricken deluge of branches many had feared was simply not happening. Greeks, who have spent the best part of five years internalising the crisis – of getting used to bad news – had reacted with their feet: they had stayed home. And those who hadn’t were willing to stand in neat orderly queues, motivated to large degree by the desire to keep up with annual taxes and utility bills.
Sticking with the IMF, the fund has just announced the successor to retiring chief economist Olivier Blanchard. Professor Maurice Obstfeld takes over the role of economic counsellor and director of the IMF’s research department in September, IMF managing director Christine Lagarde announces.
Describing Blanchard’s successor, the IMF says: “A Professor of Economics (and former Chair of the Department of Economics) at the University of California, Berkeley, Obstfeld has advised many governments and consulted at central banks all over the world. He is currently serving as a member of President Obama’s Council of Economic Advisers, on leave from Berkeley.”
Obstfeld is the co-author of two textbooks on international economics—Foundations of International Macroeconomics with former IMF Economic Counsellor Kenneth Rogoff, and International Economics with Paul Krugman and Marc Melitz.
Lagarde comments in a statement:
“I am thrilled to have Maurice join us at the Fund. His outstanding academic credentials and extensive international experience make him exceptionally well placed to provide intellectual leadership to the IMF at this important juncture. He is known around the globe for his work on international economics and is considered one of the most influential macroeconomists in the world.”
“The position of Economic Counsellor is of fundamental importance to the IMF’s ability to provide its global membership with the best possible independent analysis and policy advice. I am confident that we have found an exceptional candidate in Maurice to take this work forward.”
Ferdinando Giugliano at the Financial Times notes that Obstfeld is an expert on optimal currency areas. The eurozone will give him plenty to get his teeth into
Maurice Obstfeld,the IMF's new chief economist, is an expert of optimal currency areas.His 2013 views on the eurozone pic.twitter.com/PEghuNUOjL
— Ferdinando Giugliano (@FerdiGiugliano) July 20, 2015
You can read more about Obstfeld on his homepage, where there are links to his recent papers, including on the eurozone, like this one on “some lessons of the euro crisis”.
Further to that statement from the IMF on Greece no longer being in arrears to the Fund, as a refresher when the country missed a €1.6bn payment on 30 June it became the first developed country to default to the IMF. It joined a club that includes Zimbabwe, Somalia and Sudan, which have all fallen into arrears with the fund.
Until that point no missed payment had been more than £890m (€1.3bn). So Greece’s missed payment of €1.6bn was bigger than any previous case of arrears.
But it was short-lived and Greek officials had already said earlier today that a €2.05bn payment to the Washington-based fund was underway, representing two missed payments – that €1.6bn and another smaller one that followed in July. As just reported, the IMF says the money has now been paid back.
Now Greece has cleared its arrears at the IMF, it is entitled to more loans from the fund.
The International Monetary Fund (IMF) has just issued a brief statement confirming Greece has repaid its arrears to the fund, as had been expected after Greece got a bridging loan to cover its most pressing debts.
Gerry Rice, the IMF’s director of communications says:
“I can confirm that Greece today repaid the totality of its arrears to the IMF, equivalent to SDR 1.6 billion (about €2.0bn). Greece is therefore no longer in arrears to the IMF.
“As we have said, the Fund stands ready to continue assisting Greece in its efforts to return to financial stability and growth.”
The Greek money merry-go-round carries on in full swing today. Photograph: Niall Carson/PA
Back to the main events in the eurozone now and our reporter in Brussels, Jennifer Rankin, has been looking at Greece’s ‘now you see it, now you don’t’ bridging loan.
She reports:
The Greek money merry-go-round carries on in full swing as Athens received a €7.2bn (£5bn) loan from the EU and immediately spent almost all of it on repaying debts.
Greek officials confirmed on Monday they had begun paying back international lenders, not long after the emergency bridging loan arrived in the Greek government’s bank account.
The EU agreed the loan on Friday to enable Athens to meet urgent debt repayments and clear arrears, both necessary hurdles if the Greek government is to get a three-year bailout worth up to €86bn.
Greece’s bank branches are open for the first time in three weeks, but capital controls still stop people from withdrawing more than €420/week.
Regular readers of this blog will have become very familiar with the Financial Times’ excellent reporters in the field who have covered the Greek crisis tirelessly in recent months. News is just breaking that their pink paper could be moving to new owners.
Bloomberg reports that owner of the FT, UK-listed Pearson, is “exploring a sale of the Financial Times after receiving interest from potential buyers, according to people familiar with the matter.”
Bloomberg says Pearson is sounding out possible bidders and a sale may value the business at as much as £1bn.
That £1bn price in the Bloomberg story, incidentally, is the same the number speculated on by analysts back in 2012 when talk swirled of a FT sale by Pearson.
Turning to the UK briefly, the wave of rate hike remarks from Bank of England policymakers last week, have kept the pound strong today.
After BoE governor Mark Carney signalled that the first rise in interest rates since the global financial crash could take place around the turn of the year, traders have been re-positioning themselves to price in the chances of a hike before 2016.
That is good news for British holidaymakers jetting off abroad, whose pounds will now stretch further. It is not so welcome, however, for UK exporters given they had already been reporting pressure from a strong pound, given it makes UK goods more expensive to overseas buyers.
Bank branches across Greece have reopened today, as the financial restrictions that have constrained the country for the last three weeks are relaxed, a little, following last week’s bailout deal.
People wait to enter a bank branch in Athens this morning. Photograph: Milos Bicanski/Getty Images
That’s partly because the banking sector is still subject to capital controls, which mean people can’t withdraw more than €420 per week from their accounts, or transfer money overseas. Here’s a list of the restrictions.
An employee of a supermarket replaces the prices with the new Value Added Tax (VAT) in Athens today. Many goods and services become more expensive on Monday as a result of a rise in Value Added Tax approved by Parliament last week, among the first batch of austerity measures demanded by Greece’s creditors. Photograph: Thanassis Stavrakis/AP
Greece’s finance minister, Euclid Tsakalotos, has said farewell to one deputy this lunchtime, and welcomed another.
Nadia Valavani (the outgoing deputy fin. min.) resigned last week in protest at Greece’s new bailout programme, and is being replaced by Tryfon Alexiadis:
Alexiadis had better hit the ground running, as the Greek government must pass a second set of austerity measures later this week (probably on Wednesday night).
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