Greece announces bank holiday as the problem enters the catastrophic bank failure phase

Greek PM Alexis Tsipras has announced a holiday for banks on the much anxious Monday and put capital controls. Announcing the decision on the TV, the Socialist Party leader has blamed EU for the current confusion in his economy.

Capital control means restriction of taking away money to outside the country.

Greek problems are now graduated to the next phase where banks may face liquidity crisis. Panic withdrawal will dry resources of the banks. Most importantly, the problem will get worsened from minute to minute.

The issue of debt repayment to IMF and EU can be solved through discussion and Athens will get even weeks for it. On the other hand, the liquidity crisis in the banks is difficult to solve. And worse is that will grow into bigger problems and failure of confidence by the public in the banking system as each breadth goes.

On Sunday night, people made big ques on major bank ATMs anticipating cash drain in the banks. The ECB has also made it clear that it will not increase liquidity support because of the unilateral decision by Greece to conduct a referendum on bailout terms.

 “The situation changes from one minute to the next. First they say the banks will be closed on Monday, now for the whole week,” the Guardian newspaper of London has quoted an anxious bank cusormer outside the National Bank waiting on a que on Eleftherios in southern Athens suburb.

Mr Tsipra’s verbal attack on EU authorities indicated that Greece is moving to the route of default and a possible exit from Eurozone.

The Eurozone on its own may not come out with further emergency loans to Athens as it will be a waste of money in the background of a Greek exit from Eurozone.  

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Tags : greek crisis