It should be no surprise that eurozone finance ministers failed to agree to disburse €2 billion in bailout money to the Greek government today or to release bank recapitalization funds. Despite optimism following the recent announcement of a relatively benign program for recapitalizing Greek banks, it is hard to escape the conclusion that the Greek program again is headed off track. The government has fallen behind its reform commitments, and a substantial number of additional end-year measures look unlikely to be met. Even with substantial forbearance from Greece’s European partners, it now looks likely that conclusion of the first review of its program will be delayed and that the promised debt relief negotiation will come only in 2016. Further, an eventual International Monetary Fund (IMF) program is likely to be small and leave a large unfilled financing gap that will further strain Greece’s relations with its European neighbors. It is hard to predict how long Greek voters will continue to support a government that cannot deliver on its economic pledges of low debt and sustainable growth.
Greek banks reopened today, but there isn’t much you can do at them. Capital controls and withdrawal limits remain in effect, money transfers are barred (except for tax, social security or a few other allowed domestic transactions) and new accounts or loans effectively ruled out. Greeks now will be able to deposit checks, access safety deposit boxes, and withdraw money without an ATM card. All good things, though I suspect that any political boost from the visuals relating to reopening will proved short-lived.