ATHENS, June 5 (Reuters) - Greece’s decision to delay a loan repayment to the International Monetary Fund scared the Athens stock market on Friday but bankers say it is unlikely to precipitate a run on banks and bring about capital controls.
Athens bundled a 300-million-euro debt payment due on Friday with others payable later this month as Prime Minister Alexis Tsipras, facing fury among his leftist supporters, pushed for changes to tough terms that the IMF and EU creditors are demanding to release aid to Athens and stave off default.
Bankers played down the possibility that the delay might lead to the kind of capital controls that Cyprus imposed during a 2013 crisis, closing banks for almost a fortnight and restricting euro payments abroad for much longer.
“If it is read as Greece asking for some more time to make the payments while it tries to clinch a deal with lenders, it is unlikely to turn into a problem and bring capital controls,” one senior banker told Reuters.
“It shows (the government) is squeezed for cash and exhausting the theoretical time it has. But it also depends on the perception of depositors,” the banker added.
Bleeding deposits since October, well before the leftist-led government gained power in January, banks have become dependent on emergency funding from the Bank of Greece, authorised by the European Central Bank in Frankfurt.
The ECB has been raising the cap on so-called emergency liquidity assistance (ELA) that banks draw from the Greek central bank in increments, keeping pressure on Athens to strike a deal with its creditors over economic reforms to unlock aid remaining under its bailout programme.
Seven months of outflows have shrunk household and business deposit balances to 133 billion euros ($148 billion), their lowest level since September 2004. The ceiling on ELA currently stands at 80.7 billion euros and banks have tapped most of it.
Bank stocks, which have been volatile on the Athens bourse, tumbled more than 11 percent on Friday, underperforming the broader market’s nearly 5 percent slide.
Deputy Social Security Minister Dimitris Stratoulis made clear that skipping the IMF payment was a challenge to the lenders in the hope they will ease their terms.
“The government’s move is a message that it wants to wait and see how far they will take it, if they will back off from this unreasonable, inhumane, colonialist package they are proposing,” Stratoulis, who is close to the hard-left faction of the ruling Syriza party, told Greek TV.
Athens has rejected benefit cuts and tax rises the EU and IMF want before they release fresh loans to avert bankruptcy.
Another Greek banker criticised the government’s tactics. “I see this as a tactic of pressure that prolongs the drama. The move to lump IMF payments rests on the foolish view that this could scare Europe, but by itself will not bring capital controls closer,” the banker said.
However, the delay gives hawks such as Bundesbank President Jens Weidmann on the ECB’s Governing Council more reason to demand more collateral from the banks in exchange for ELA funding, worsening their liquidity situation. “It is likely that Weidmann and his followers in the ECB will now have an additional argument for criticism,” the banker said.
Weidmann told Reuters last month that European partners cannot simply keep buying Greece more time to calm financial markets and that it is up to Athens to stabilise its economy.
Two other Greek bankers said there was no pick up in deposit withdrawals on Friday. “It was a relatively calm day, (there was) no change in the pace of outflows we have seen in the last days - I estimate around 250 million euros for the system as a whole,” one of the two senior bankers said. ($1 = 0.9007 euros) (Reporting by George Georgiopoulos, additional reporting by Lefteris Papadimas, editing by Gavin Jones and David Stamp)