Is this the beginning of the end for the eurozone? For years, European officials have been trying to “fix Greece”, but nothing has worked. Now a worst case scenario is rapidly unfolding, and a “Grexit” has become more likely than not.
On Sunday, the European Central Bank announced that it was not going to provide any more emergency support for Greek banks. But that was the only thing keeping them alive.
In order to prevent total chaos, Greek banks have been shut down for at least a week. ATMs are still open, but it is being reported that daily withdrawals will be limited to 60 euros.
Of course nobody knows for sure if or when the banks will reopen after this “bank holiday” is over, so needless to say average Greek citizens are pretty freaked out right about now.
In addition, the stock market in Greece is not going to open on Monday either. This is what a national financial meltdown looks like, and the nightmare that has been unleashed in Greece will soon start spreading to much of the rest of Europe.
This reminds me so much of what happened in Cyprus. Up until the very last minute, politicians were promising everyone that their money was perfectly safe, and then the hammer was brought down.
The exact same pattern is playing out in Greece. For example, just check out what one very prominent Greek politician said on television on Saturday…
“Citizens should not be scared, there is no blackmail,” Panos Kammenos, head of the government’s coalition ally, told local television. “The banks won’t shut, the ATMs will (have cash). All this is exaggeration,” he said.
One day later, the banks did get shut down and ATMs all over the country started running out of cash. The following comes from CNBC…
Despite a tweet from Greek Finance Minister Yanis Varoufakis that his government “opposed the very concept” of any controls, Greek Prime Minister Alexis Tsipras said later Sunday that he had forced the country’s central bank to recommend a bank holiday and capital controls.
The Athens stock exchange will also be closed as the government tries to manage the financial fallout of the disagreement with the European Union and the International Monetary Fund. Greece’s banks, kept afloat by emergency funding from the European Central Bank, are on the front line as Athens moves towards defaulting on a 1.6 billion euros payment due to the International Monetary Fund on Tuesday.
So what is the moral of this story?
Never trust politicians – especially when a major financial crisis is looming.