Greece and Eurozone Talks Stall as Deadline Looms
Sliding towards default
Greece and the Eurozone have been unable to reach an agreement ahead of a bailout deadline which quickly approaches on June 30th. If negotiations fail, Greece could leave the European Union and ultimately face economic collapse.
The situation is already causing a dash for cash in the debt strapped country.
Bloomberg reports:
Greeks Line Up at Banks and Drain ATMs as Tsipras Calls Vote
Some Greek banks were beginning to limit cash transactions as hundreds of people lined up outside branches and drained cash machines after Prime Minister Alexis Tsipras called a referendum that could decide his country’s fate in the euro.
Two senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece. A central bank spokesman said it was making efforts to supply money to the system.
Some banks were placing limits in daily bank note and ATM transactions. Yiota Kardogianni, a manager at a branch of Piraeus Bank SA, said cash withdrawals were limited at 3,000 euros ($3,350) daily and ATM withdrawals at 600 euros. Alpha Bank AE had set a daily limit of 5,000 euros for most of its branches since last week.
Greek prime minister Alexis Tsipras has called for a referendum which pleased members of his party but has angered Eurozone leaders. Watch this recent video report from the AFP:
CBS News asks the most important question:
What happens if Greece defaults?
Although Greece’s economy is small, accounting for just around 2 percent of the eurozone’s overall GDP, the ramifications of the country’s collapse and exit from the euro for the U.S. cannot be ignored, according to experts. For one thing, the European currency would tank, making U.S. exports to the European Union, a key market for many multinational companies, more expensive.
In a worst-case scenario, the U.S. economic recovery could be derailed, and Russia’s influence in Europe might grow, according to experts.
The European Central Bank (ECB) might have to take action to prevent the Greek crisis from spreading to the rest of Europe, particularly in Italy, the third-largest economy in the eurozone, which has its share of economic problems.
“While the euro can very well survive without Greece, it is difficult to imagine how the euro could survive if Italy were to eventually follow Greece out of the euro,” according to Lachman of the American Enterprise Institute.
Featured image via YouTube.
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Comments
as many as 500 of the country’s more than 7,000 ATMs had run out of cash
That’s 7%. So 93% of ATMs are not short of cash.
It sounds like the Greek-in-the-street either took all his cash out long ago, or is very confident that Europe will bail Greece out again.
You are assuming facts not in evidence. For all you know, other ATMs may have been taken off line periodically or permanently to avoid a run.
But it is true most Greeks who mistrusts the banks already took their money out. That, and the outflow of money to foreign banks, has been going on for over six years.
The information in the article fails to support the “dash for cash” claim.
Unless some miracle happens it’s over for the Greeks. All offers expire June 30 according to the EU, IMF and the ECB today. The referendum scheduled for next Sunday will vote on matters that die on June 30. Too late. It won’t be too long before the Greek people will be forced to use both sides of their toilet paper.
Or copies of our Constitution like everyone else.
The black market seems to be half of their economy, but who will pay all the government union workers?
They elected the “commie” but he seems to mostly beg for more bailout money from the capitalist countries that actually produce.
Unfortunately, our commie in chief just takes from the productive, and borrows off traditional America’s good faith and credit, even as he tries to destroy our values.
SCOTUS “defaulted” on their promise to not write law against the people’s will, and a few days later the global economy seems to be on the brink. Maybe our rulers have a plan?
There is no miracle that will save Greece from default, and anyone with basic math skills has known it for years. Even if they reform their pensions as demanded – which the people will not permit – they still don’t collect enough revenue to pay the costs of their government and also repay the debt, even at its lowered level since the 2011 bailout.
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The business taxes Greece doesn’t collect have not been collected in 30 years at least, since the military was in power. Any idea it was possible to suddenly begin collecting any significant portion of that was born in the fevered dreams of a drunken Belgian banker. It is not.
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Default will increase the pain for Greece in the short term, but that pain is coming anyway (GDP is contracting, debt to GDP now at 197% and climbing). Better to end the charade and get it over with. After a tough year or two, Greece will begin to look good again to investors, and can recover with their new drachma.
Putting the pain off has increased its total harm, and will keep doing so until they surrender to reality.
Greece is on permanent vacation, and confident that it can con rich Uncle Europe into paying its bills. This is actually a rational and economically sound plan so far as Greece is concerned, provided that Europe (meaning, basically, Germany) does indeed continue to pay.
However, the situation has recently changed. The last Greek election has made something clear, something which perhaps was not totally obvious earlier; neither the government nor the Greek electorate attach any importance to repayment of financial obligations. It seems likely that Tsipras’s upcoming referendum will confirm this.
The obvious implication is that maintenance of the EU facade will become increasingly expensive as other European countries which are in serious financial holes see how Greece has managed to con its way onto Easy Street, and some of them may consider doing the same. Certainly Italy and Spain are in sufficiently dire financial straits to make such a plan seem attractive. And while Europe can probably afford to support a parasitic Greek economy for some time, compensating for the shortcomings of the much larger Italian and Spanish economies would be a very serious drain. The only plausible way out of this bind seems to be to cut Greece out pretty much immediately. Then full parasite mode will not be particularly attractive to the remaining PIGS, and perhaps an EU—one without Greece—can be salvaged.
As for Greece, things will be grim. It has no major industrial or agricultural bases; the tourism industry is about all it has. Analogies to the Argentine situation are deceptive; Argentina is a resource powerhouse compared to Greece, and resources can be sold internationally for cash. Default will isolate Greece from the international bond market for at least a decade; so, no more European loans, and no other loans either, leaving no source of money but the printing presses. The prices of imports will skyrocket, as will general inflation, no matter what currency Greece tries to use.
The government is basically communist, so we have a pretty good idea how it will react. It will try to control rampant inflation by imposing price controls. This will have the usual effect; catastrophic shortages. Tourism will do alright, as Greece will become very inexpensive for anyone with foreign currency, and that will ameliorate the disaster somewhat, at least as long as the government can maintain a useful degree of law and order. A rise in violent crime will, naturally, drive tourists away.
This could all change without notice; at any time Uncle Europe could decide to indulge Greece whatever the cost. After all, during the 20th century, Europe probably held the record for the most miserable political blunders per square mile, and nobody should be surprised if it makes a try for the same record in the 21st.
Meanwhile, what is Comrade Tsipras up to? Disaster for Greece does not necessarily mean disaster for his political career. For several months now, he’s been making public announcements apparently designed not to inform the Greek electorate of the problems actually involved, but to fostering a bizarre fantasy that the Greeks are doing something terribly courageous by defying their creditors. This is not the rhetoric of a man trying to honestly solve a problem, but rather the propaganda of a man deliberately fomenting disaster but hoping to get a couple of re-elections out of it.
That is true, and if they do care, pensions and holding on to jobs are more important than bondholders, but they are willing to increase some taxes except the EU insists on spending cuts.
Greece’s Finance minister has said Greece is bankrupt – there is no way these debts can be paid back anyway. You can just get the illusion of it, at the cost of doing something that reduces GDP.
Greece is not going to do as many in the EU expect.
I don’t think Greece is going to impose capital controls, either.