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Hans-Werner Sinn: "Impose Capital Controls In Greece Now To Avoid Another Cyprus"
There is a saying: "strike while the rehypothecated iron is hot", and nobody is better at it than Germany, which hours after the latest disappointing Eurogroup summit failed - again - to reach a solution on the third iteration of the Grexit dilemma, has decided to pour even more gas on the fire in the form of infamous Euroskeptic, the president of the Ifo Institute for Economic Research, Hans-Werner Sinn who in an FT op-ed beckons someone, supposedly Europe's federalist, if non-existant, powers which in the mind of the German have control over Greek sovereignty, to immediately 'impose capital controls in Greece or repeat the mistake of Cyprus."
And while the key letter excerpts can be found below, the most notable section is the following:
The ECB is underwriting a temporary reprieve for Greek banks that would otherwise be bankrupt, and doing so at the risk of eurozone taxpayers. It is ultimately the citizens of other eurozone countries who, without having been consulted, are providing credit at their own risk to enable wealthy Greeks to whisk their money to safety.
The Greek central bank should not be allowed to live beyond its means. Assistance for the country’s commercial banks should be capped at €42bn. The Greek government should then set up capital controls to stop money from leaving the country and keep its banks solvent. The Cypriot example should not be repeated.
Because how else could one define the friendship, camaraderie and trust that mark all the spokes of the European "Union"...
Excerpts from the Financial Times
Another crisis, another insidious bout of capital flight. In Greece today, as in Cyprus three years ago, depositors are withdrawing bundles of euro notes to be spirited out of the country. Most of all, investors are rushing to make electronic transfers to banks elsewhere in the eurozone. In December 2014 alone, €7.6bn were sent abroad, equivalent to about 4 per cent of Greece’s economic output.
In 2012, Cyprus was in a similar bind. Wealthy Cypriots (and foreigners who had deposits there) tried to whisk their funds to safer places, draining liquidity from the island’s banks and threatening them with insolvency.
The Cypriot central bank kept the system afloat by lending out €11bn of newly created money under a protocol known as Emergency Liquidity Assistance. These funds were in effect borrowed from other eurozone central banks, which put euros into the new accounts outside Cyprus that were being set up by fleeing investors.
Without that support, Cypriot banks would have gone under, and depositors could have withdrawn no more cash. As it was, capital flight — financed by other eurozone central banks — continued until spring 2013, when the abuse of the eurozone’s emergency protocols grew too large to ignore and the European Central Bank pulled the plug. Cyprus then had no choice but to impose capital controls; without the ECB’s generosity, it would have done so much earlier. By the time Laiki Bank was pushed into insolvency, it had received €9.5bn in ELA credits.
The situation is not yet as extreme in Greece, but it is heading that way. The exodus of capital must have increased significantly as the new year started, as Greece’s incoming government met a cool response in European capitals to its demands for more money.
We do not yet know the so-called Target balance owed by the Greek central bank to the rest of the eurosystem at the end of January. But we do know that the Bundesbank’s Target claims on the ECB jumped by €55bn, the third-largest increase since the outbreak of the financial crisis eight years ago. This signals a huge flow of money into Germany. A portion of it is likely to come from Greece.
The resemblance is worrying. To repay what it owed eurozone monetary institutions, Cyprus later received €10bn from a rescue programme put together by the governments of eurozone countries. Once the ECB council had put taxpayers on the hook, parliaments had no other option but to haul them out. We cannot allow this situation to be repeated in Greece.
Last week the ECB Council curtailed the Greek central bank’s ability to lend newly created money to commercial banks. Previously, this was allowed so long as debt issued or guaranteed by the Greek government was handed over in return, but assets backed by the Greek state are no longer deemed acceptable collateral. Access to the national printing press had apparently been used up already, to finance the efforts of wealthy Greeks, banks and international investors to flee a sinking financial system.
* * *
The Greek central bank could be said to “own” about €38bn of the eurosystem’s stock of central bank money, in the sense that it is entitled to the permanent flow of interest income it generates. In addition, the central bank is entitled to the returns on €4bn of equity, including valuation reserves. That leaves a shortfall of €23bn. This repeats the mistake made in Cyprus, where ELA credits exceeded by 244 per cent the amount that the central bank was in a position to repay.
The ECB is underwriting a temporary reprieve for Greek banks that would otherwise be bankrupt, and doing so at the risk of eurozone taxpayers. It is ultimately the citizens of other eurozone countries who, without having been consulted, are providing credit at their own risk to enable wealthy Greeks to whisk their money to safety.
The Greek central bank should not be allowed to live beyond its means. Assistance for the country’s commercial banks should be capped at €42bn. The Greek government should then set up capital controls to stop money from leaving the country and keep its banks solvent. The Cypriot example should not be repeated.
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Germans telling Greeks how they should live, and they wonder why the Greeks want OUT?
Good Morning from Asia :)
Hans-Werner Sinn has always been against the Euro and the whole Debt Circus in its current form, but according to ZH he now represents the Ugly German who wants control over Greece. Non-governmental statements now represent the stance of the German government? Too bad the alternative media, like the MSM, does not even try to recognize the truth and reality, but goes down to the blame game that is fun and entertaining. But the fact is that even among the alternative media, you have to really remember that the truth is Out There somewhere (=use yr own brains.)
ECB shoud give Greek banks 9 million dollars and through the magic of fractional reserve banking they could lend Germany all of the money owed for interest payments. Germany could take that money and using the magic of fractional reserve banking they could loan Greece more money which when passed through the magic of fractional reserve banking would be enough to fund Greece for eternity. Yeah, something simple and magical like that.
/sarcasm
Soros warned about the germans ...
What capital control ???? there is no wealth, it's long gone
no deal = down 10 spoos
deal = up 100 spoos
once they start that in Greece they may as well do it simultaneously in Italy, Spain, Portugal, and the rest of Europe, cuz that will cause an immediate bank run.
Anyone with any "money" in the banks needs to start their bank run as soon as possible anyway. Same in America. Why keep anything in these fucking banks? Get it out now.
Those who withdraw first withdraw best.
what does he mean, cyprus was a 'mistake' ? I thought the template worked exactly to their whims....
Mate you can FUCK Soros right off, and the horse he rode in on too. And his idioic diciples.
2 things are important here.
I think 3 things are the case here.
1) They will make the GREECE crisis seem bad, and send the market down a BIT so that Smart money who missed this nice rally in FEBRUARY can get back in and Make Big money in the coming months.
2) Crude / energy is nearing a bottom here => http://bit.ly/1fMcakI
Am I the only one in here that thinks this whole GREECE thing is another one of those things happening since 2009, lets the market cool off a bit, so the smart money can get back in the market, then all of a sudden things get really really positive again, and JESUS SAVES, and no one goes bankrupt and we rally up 120 Points on the the S&P 500.
Praise the lord! and ....stuff....right!?
Soros never warns about the Jews though
I'll assume you are being sarcastic. Soros has been an anti semite for decades even though he is Jewish.
i never heard of the guy, but what you are saying and what he is saying about greece are contradictory.
if what you are saying its true, than he should know it is not greece but other players with all this debt thing ....about cyprus as well.
sounds to me like a cheap german stupido ... another whore
H-W S is a real black sheep of the German political landscape. Every political party hates him because he says the uncomfortable truth. Which is that the Euro does not work, and it will end badly. Lots of campaigns to discredit this guy who is just honest.
common man awake up ... you dont get those jobs by being a black sheep
Double removed
Triple removed
Don't they serve coffee for breakfast there in Asia?
End the charade. Time to bring back the drachma, the mark, the lira and the franc. The Euro is now like a dead great white shark floating in the water, soon to be devoured by other predators.
+1 Yes please. Political monetary unions tend to fail. You cannot put countries with a total different mentality together in the name of the "European Peace Project" or whatever they call it.
"Political monetary unions tend to fail."
what world do you live in?
everything is political ... how do you think anything gets done? by chance or the mr. market?
Europe is failing because it was designed to fail and YES, it was political decision. WHY? just a break or step back before you move one to another political decision of one world currency ... i guess you are way beyond, waste of time
Sadly, you actually are very correct. Everything is temporary and only for the benefit of the moment. (instead of the future)
you are getting spiritual, but this is a real thing and it is not because of human nature ... just the way things are.
The sole reason countries need/want their own currencies is the ability to abuse (read over print) them. If there was a single currency for trade and that currency was used for just trade (and wealth could be stored in other forms) then a lot of this nonsense would go away.
Things could also work well if there was no manupilation of currency markets (ala the currency wars of constant depreciation to favor exports).
The Euro is a potentially strong currency. It has done well at preventing inflation. BUT that is exactly the problem! These socialist countries all need an easy currency to keep the promises of cradle to grave support alive. Socialism is impossible in the long run and it kills liberty.
Finally the euro has gold on its balance sheet marked to market. EVen if they did over print the save in gold would be safe as the POG would rise in euro terms.
There are solutions here but they are all painful. Some of the silliness must stop.
I want to rock-n-roll...all day...and party every night!!! I want to...
rofl, game of thrones.
+1'd this. Made me chuckle.
So, instead of the toika fucking the citizens, you now want the government to fuck them. I think author is missing the point of what the current government is trying to accomplish.
Buy bitcoinopolis
I prefer goldacoitus and silveracoupling in the days ahead they will buy that most effectively..
"The ECB is underwriting a temporary reprieve for Greek banks that would otherwise be bankrupt, and doing so at the risk of eurozone taxpayers. It is ultimately the citizens of other eurozone countries who, without having been consulted, are providing credit at their own risk to enable wealthy Greeks to whisk their money to safety. "
BULLSHIT.
It is the ECB that is underwriting a temporary reprive for insolvent EURO System Banks with offices in Greece.
The Taxpayers have not been consulted in ANY nation; thus this is a perfect example of ODIOUS DEBT which should be absolutely catagorically rejected, summarily denied, and defaulted without reservation or discussion at the very earliest possible convenience!
These debts have not been voted on by any legislature or parliament representing any soverign peoples of any nation anywhere and have been created entirely at the whim of unelected ECB banking system technocrats with the explicit purpose of salvaging EURO system inter-banking debts.
Would appear since money is debt you have to repudiate the money then.
This is why everyone is suddenly talking "inequality.". Has nothing to do with rich versus poor but the fact that Germany so dominates the Continent of Europe's economy.
Looks like a balance of payments problem with all the euro's getting sucked out of Greece and into Germany.
Sure...the euro is now tanking...forget capital controls, these are all intra bank transfers. Greece needs to nationalize the banks and the gold mine lest the " asset stripping" proceed down to the last block of limestone.
If that means no more Club Euro...so be it.
Greece spent too much on weapons and was Europe's largest arms importer. Good for bribes from US, France, Germany but not exactly a productive use of capital
"Sure...the euro is now tanking...forget capital controls, these are all intra bank transfers. Greece needs to nationalize the banks and the gold mine lest the " asset stripping" proceed down to the last block of limestone. "
Intra bank tranfers: word.
People talk of bank runs as if the money were being withdrawn in cash and being stuffed into mattresses and hiden under floorboards and behind picture frames. Billions of Euros have been withdrawn??
This is mostly electronic money moving from one Ebank account to another Ebank account -all still within the inter-Ebank system.
There never was much cash in the drawer under the counter at any of these banks to begin with...
Now the EHellenic Debit Card is empty and the EDeutch Card is full and EDeutch isn't leaving anything lying around on the local servers in Athens after 3PM? So what? What does that really change unless the ECB shuts off liquidity and payments to member Ebanks unilaterally?
Bank runs? It's all still mostly just electronic Euros inside the electronic Euro accounts and payments system unless something truely extraordinary is underway that no one is talking about.
LOL.
I'm sure the bankers and top politicians are stuffing their Swiss bank accounts with every euro coming into their clutches. The average Greek sees 1% of it or less.
Exactly. The "rich Greeks" bailed out a long time ago.
The real looters have been executing on this one for some time now.
Meh, the "little people" already did the bank run thingy on the way home from voting for Syriza.
Let the sharks eat themselves.
Does anybody with money still keep it in greece?
Please no more lazy Greeks sucking off the hard working Germans.
Let the rich Greeks support their poor bethren instead.
LOL motherfuckers !
so, money left in the banks is the balance of gov funding? til? what happens when funds run out?
banks for sale, empty vaults and furnature? angry plebs connecting the dots?
long ink and printers. dracama coming to an empty bank in greece.
Oops. Dude mentioned Cyprus.
Buy gold 2.0!
I seem to remember reading something here a while back about how the Cyprus banks got into their financial trouble because they had "invested" in the Greek banks under the "encouragement" of the ECB/Troika/whatever, who then refused to help Cyprus in a deliberate attempt to punish "greedy" Russians.
Well, yer positronic recollections are indeed correct!
Honest men with bank accounts,wherever they're,will never defeat the corrupt insiders that run banks,Cyprus,Greece are exactly the same in their corrupt mentality........btw they are not alone.
For those in Greece, I wish you God's wisdom, and sound judgment.
NOW is the time to protect anything you still own. Expatriate any liquid holdings, NOW. It might be sound to consider that one minute early is better than one second late.
An American band called 'Iron Maiden' sums it up:
https://www.youtube.com/watch?v=geHLdg_VNww
You can always repatriate later, should the situation stabilize. The current situation can change extremely rapidly; and you may be left with no opportunity.
In memory of my good freind Steve Kalgerakos:
MontgomeryScott
Collapse the Euro, bring back national currencies.
Regroup those nations willing and able to share a common currency and common fiscal authority. Make the union a federal fiscal union.
Put the horse finally before the cart or the cart will pull not only this horse but the entire stable into the crapper.
Yeah but then Germany will lose all those open markets where it could ship its stuff free of Korean or Chinese or Japanese competition.
Just be listening for Wolfgang Shauble' and the rest of the Brussels Harpy(s) shrill soprano voices when the "Baritone from Russia" enters the room bearing gifts?!!!
Sinn is right but clearly the EU Myth cannot accept capital controls and the money will already be in London or Luxembourg where most wealthy Greeks "reside" or at least their money does with their businesses loaded up with debt in Greece so they can extract interest payments and royalties instead of profits.
It is pretty obvious banking centres will leverage every peripheral area and load the repayments onto the suckers who are not mobile. It is strip-mining at its best, take the profits in the salons and leave the slag in the fields.
Hans-Werner Sinn:
Economics is not a science, therefore try not to prescribe solutions to a problem economics cannot fully explain.
Free markets provide for capital controls via higher interest rates and less foriegn investments.
A big yes for one of the best European economists.