The Corner

National Security & Defense

Greece: Banks to Remain Closed, Deposits ‘Safe,’ Capital Controls Coming

BBC:

Greek banks will be closed and capital controls will be imposed, Prime Minister Alexis Tsipras says. Speaking after the European Central Bank (ECB) said it was not increasing emergency funding to Greek banks, Mr Tsipras said Greek deposits were safe.

Hmmm . . .

Financial Times:

Greece has moved to close its banks and impose capital controls to prevent financial chaos following the breakdown of bailout talks with its international creditors. The dramatic move on Sunday night came after the European Central Bank announced it would freeze the amount of emergency loans it supplied to keep the Greek banking system afloat.Officials said the bank closure would last for several days and would be accompanied by limits yet to be announced on bank transfers abroad and withdrawals from cash machines. The cashing of cheques would be halted and fixed term deposits would be locked down. The Athens stock exchange was also set to be closed.

The day’s events followed the surprise move by the Greek government to call a referendum on new bailout terms offered by the country’s international creditors, triggering a rupture with Athens’ eurozone partners and pushing the country closer to exiting the single currency…

The Greeks are at least having a referendum on whether to accept the terms of the bailout. Voters in the creditor countries are not so lucky – European monetary union, democracy: choose one.

At the moment it seems that there will be a majority in Greece to accept what’s being offered. Awkwardly that offer expires on June 30, before the referendum on July 5. At the moment those in charge seem to be suggesting that the offer will not be extended, but I find it difficult to believe that they will risk a Greek departure from the euro zone over a delay of a few days.

Next thing to watch: the reaction on international markets. Will the Greek crunch be treated as Cyprus 2.0 (basically a non-event) or will it be seen as a harbinger of far greater chaos to come? If it’s the latter, the euro-zone leadership will be much more likely to blink.

Could it be less than two months since Jean-Claude Juncker, president of the EU Commission, was describing the euro zone as an “area of solidarity and prosperity”?

Why, yes it could.

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