A Third Greek Bailout Doesn’t Mean The End Of Capital Controls

Right now the big question is whether Greece will accept the harsh terms set by the Eurogroup to avoid Grexit, but even if there is a third bailout it doesn’t mean that capital controls will be lifted anytime soon. Greek banks, while still solvent, have lost a quarter of their deposits since last December and now have such a small liquidity buffer that even with ECB support they may not be able to risk another round of deposit withdraws.

“While the current collateral buffer (which we estimate at around €15bn) should allow Greek banks to keep operating if the ECB’s Governing Council approves a further increase in the ELA, we think it will not be enough to absorb any...