Greek Financial Market to open as talks with creditors continue

Greek financial markets reopen on Monday after a five-week suspension as talks continue with creditors on austerity measures and reforms required for a third bailout.

Local traders will be able to buy stocks, bonds, derivatives and warrants under certain conditions, according to the Finance Ministry. International investors won’t face any restrictions, as long as they were active in the markets before they were shuttered in June.

The resumption of trading comes as Prime Minister Alexis Tsipras negotiates conditions that will be attached to an 86 billion-euro ($94.5 billion) lifeline to see the country through the next three years. An agreement is needed before a payment comes due on bonds held by the European Central Bank on Aug. 20.

Talks Friday with representatives of the International Monetary Fund, the European Stability Mechanism, the European Commission and the ECB were held in “a very good climate and will continue,” Finance Minister Euclid Tsakalotos said on Friday. “There has been convergence in some areas and less in others.”

Greece imposed capital controls June 28 and shut its banks and financial markets after Tsipras ended talks with creditors about a bailout in order to hold a referendum. He then reversed course and agreed to implement creditor demands in exchange for a rescue package.

About a quarter of Tsipras’s Syriza-party lawmakers defected in July, effectively stripping the premier of his parliamentary majority and forcing him to rely on opposition support. The government remains at loggerheads with lenders over whether additional belt-tightening measures are required before a disbursement from the new ESM-backed program can be made.

Further Loans

Loans to Greece can happen “only if there is a high probability these will be reimbursed,” Carlo Cottarelli, IMF executive director for six European countries including Greece, told Italy’s Corriere della Sera in an interview published Saturday. In the current circumstances, the IMF doesn’t consider Greek debt to be sustainable and measures are needed to reverse this situation, he said.

Greece will have 30 years to repay new funds from the ESM, Greek Economy Minister George Stathakis said in an interview with Efimerida ton Syntakton on Saturday. That’s “a development that opens the prospect for significant restructuring of debt in line with what the IMF has been asking for,” he said.

Economic Contraction

The imposition of capital controls has restricted the functioning of Greece’s economy, with the country set to be the only euro-area nation to shrink this year. The economy may contract by as much as 4 percent this year, according to a July 29 report from the Greek parliamentary budget office.

While banks reopened on July 20 with limited services, the budget office estimates the controls cost the economy 4 billion euros to 10 billion euros. That compares with 2014 output of 179.1 billion euros. Greek gross domestic product has contracted more than 25 percent since 2007 as two bailouts with austerity conditions including salary cuts took their toll.

While no shares have changed hands on the Athens stock exchange for five weeks, investors haven’t been without ways of betting on what will happen when trading resumes.

An exchange-traded fund listed in the U.S., the Global X FTSE Greece 20, has continued to trade, serving as an instrument for pure speculation in the absence of local prices. That security has fallen in four of the last five weeks and closed on Thursday down 19 percent since the last day the Athens market was open. Daily volume in the ETF has averaged more than 2.2 million shares, almost twice the rate in the month before the closure.

Lifting Controls

Greece is seeking to fully lift the controls by October, or by the end of 2015 at the latest, Deputy Prime Minister Yannis Dragasakis said in an interview with Real News published Sunday.

Their removal will depend on lawmakers approving the new bailout agreement, on an increase in liquidity from the ECB and the recapitalization of Greek lenders without recourse to a bail in of deposits, he said.

Greece’s third rescue package is a “farce” and won’t fix the problem, former Greek Finance Minister Yanis Varoufakis said in an interview Sunday with Spain’s El Pais newspaper. Greece is going through “fiscal torture” and is being suffocated by liquidity restrictions, he said. Bloomberg