The Greek stock market crashed more than 20% Monday as it reopened for the first time in five weeks.
The benchmark index in Athens opened nearly 23% lower, with banking stocks among the biggest losers. The country’s four biggest lenders — Piraeus, Alpha Bank, the National Bank of Greece and Eurobank were all down 30%.
Greece’s financial crisis forced the authorities to suspend all trading at the end of June to prevent a meltdown. Capital controls were introduced, including the closure of banks and financial markets. ATM withdrawals were limited to 60 euros ($66) per day.
The banks reopened on July 20, after Europe agreed in principle to a new bailout, but withdrawals remain limited to 420 euros ($455) a week.
Greek banks are in a dire state, relying on emergency cash from the European Central Bank to stay afloat. Greece’s new $96 billion bailout plan includes 25 billion euros ($26.7 billion) to recapitalize the banks.
But even with the bailout, investors are bracing themselves for huge losses as they may have to contribute to the rescue of the banks.
That’s because Greece was required to adopt European Union rules on restructuring banks as part of the new bailout agreement. These rules are designed to place more of the burden of bank rescues on investors and major depositors rather than taxpayers.
Greece urgently needs money before August 20, when it must make a payment to the ECB if it wants to stay in the euro. Greece’s economy has been paralyzed by the crisis. Latest data on manufacturing activity in July were at record lows.