This is significant because the ESM is expected to provide a chunky amount of the funding for the third bailout and this bailout is also expected to include a recapitalisation of the Greek banking system. Our SSA strategist Matt Cairns has noted that if the ESM is to directly recapitalise the banking system then private investors must have first been 'bailed in'.



Given that the liabilities side of the Greek banking system is dominated by 'unhaircutable' central bank borrowing, it is perhaps no surprise that German officials are reported to have pressed for deposits above EUR 100,000 to be used in any recapitalisation.



Today Greek banks will be re-opening, with the EUR 60 per day withdrawal limit replaced by a weekly limit of EUR 420. However, the capital controls concerning transfer of money in and out of the country seem set to remain.



"Today Greece is expected to repay a EUR 3.5bn bond redemption due to the ECB. Funding for this will come from the EFSM. It is also expected that Greece will clear its arrears with the IMF", says Rabobank.



The reforms to be passed this week in the Hellenic parliament include,

Modernising of the justice system.

Adoption of the EU's Bank Recovery and Resolution Directive.