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Greek Crisis: What's Next After Capital Controls?

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Greece Imposed Emergency Capital Control

 

Greece is still staring down the barrel of a $1.8-billion loan payment to the IMF (supposedly due on Tuesday). The latest development is that Greece imposed emergency capital controls and closed banks starting Monday June 29 until after a July 5 referendum on a deal with European creditors. The real cash has already fled as people have moved most capital (that could be moved) out of Greece, which could be partly why things in Greece have so far remained in an orderly fashion.

 

Global Investors Run for Safety


Media reported long lines at ATMs (ATM withdrawals have been limited to 60 euros per card), while global markets shuddered on Monday under the fear of a contagion effect from a Greek default. On top of the Greek Drama, investors are also troubled by the bubble trouble in the Chinese market as PBOC took actions over the weekend to avert a risk of market collapse.

 

 

Related - Chinese Stocks: "How to Think Like a Billionaire Investor" 



Euro, the EU bloc currency, reacted badly to the Greek Drama (see chart below).  Greek two-year bond prices yields jumped to ~ 34%, while investors run to safety as prices of 'safe haven bonds' from Britain, Germany and the United States all rose.

 

Chart Source: The New York Times, June 29, 2015 

 

 Global Implication    

 

NYT quoted Rajiv Biswas, chief economist for Asia at IHS Global Insight, saying that if Greece defaulted and left the eurozone, the effects on Europe’s economy and on exporters in Asia would depend on whether European leaders could prevent financial troubles from spreading to Portugal, Spain and possibly Italy. However, the damage would not be as bad as people seem to be preparing for, as Biswas estimated in the case of a contagion, economic output in Asia could drop 0.3% next year on lower exports to Europe.

 

Referendum Is A CYA by Tsipras & Syriza


I believe Greek people (including PM Tsipras and the Syriza Party) want to take the deal to stay in EU and the Eurozone (who wouldn't with so many perks associated with being a member of the bloc). However, since Alexis Tsipras the leftist Syriza party won the election by making promises to voters that they could go back to the way it was, and the EU would fold.  Well, EU and Merkel not only did not fold but also got totally fed up.

 

Basically, this is as good as it gets for Greece, and everybody knows it.  But Tsipras and Syriza party have to put it to a vote so they may spin it as a 'voter decision' to save face with their constituents.

 

Debt Problem Years to Come

 

For now, the situation in Greece could get much worse if voters refuse to accept creditor-imposed reforms in the Sunday referendum.  CNBC reported that billionaire Willbur Ross expressed concern of a possible social unrest in Greece.  Since Wilbur Ross has a large interest in Greece, I think he may have a biased view.  I believe the most likely outcome is that the referendum would pass on Sunday, and Greece would stay within EU and the Eurozone.  

 

However, a deal is by no means the end of anything.  This Greek Debt Drama may be in production for years to come where Greece would be stuck digging itself out of the hole it has created through years of deficit spending and free borrowing.

 

 

Graphic Source: WSJ.com (updated June 29, 2015)

 

Graphic Source: BBC

Greek Capital Controls  

 

The following is a translation of a document provided by the Greek government via Bloomberg, giving details on the capital controls, if readers would like to catch a glimpse:

  • From Monday, June 29, 2015, banks will remain closed up to and including Monday, July 6 
  • Deposits are fully safeguarded  
  • The payment of pensions is exempted from the restrictions on banking transactions. Management of credit institutions will announce how these will be paid  
  • Electronic transactions within the country won’t be affected. All transactions with credit or debit cards and other electronic forms (web banking, phone banking) can be conducted as normal  
  • Prepaid cards may be used to the limit existing before the beginning of the bank holiday  
  • From midday June 29, ATMs will operate with a daily cash withdrawal limit of 60 euros per card, which is equivalent to 1,800 euros a month  
  • Foreign tourists can make cash withdrawals from ATMs with their cards without restrictions provided these have been issued abroad  
  • A special Committee to Approve Bank Transactions has been established at the State General Accounting Office in cooperation with the Finance Ministry, the Bank of Greece, the Union of Greek Banks and the Capital Markets Commission. This committee will deal with applications for urgent and imperative payments that can’t be satisfied through the cash withdrawal limits or by electronic transactions (e.g. payments abroad for health reasons). Wages paid electronically to bank accounts aren’t affected

 

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Tue, 06/30/2015 - 06:30 | 6253225 Mountainview
Mountainview's picture

Next step: Introduction of a parallel currency, the Domestic Greek Euro (DGE). DGE is used to pay state officials, members of army and accepted for all domestic payments like taxes, fares and public services. Soon you can buy food in DGE. So Greece doesn't leave the EURO, only it will be for domestic use only.

Tue, 06/30/2015 - 05:14 | 6253170 ThankYouSirMayI...
ThankYouSirMayIHaveAnother's picture

Can't make obligation today, bigger nut due in about a month. Gonna be a HOT summer on the southern tip of the Balkans.

Tue, 06/30/2015 - 00:59 | 6252946 Usura
Usura's picture

Will Angela Ferkel soon begin to squeal?

Mon, 06/29/2015 - 21:14 | 6252137 p00k1e
p00k1e's picture

If the Grecian Folks were smart, and they aren’t – they would leak the e-mail explaining how the Grecian Folk will lead new global monetary system. 

That’s the way to recapture former glory and refill the Parthenon. 

Mon, 06/29/2015 - 19:11 | 6251791 CHC
CHC's picture

"Other than that little itty bitty interruption Mrs. Lincoln, overall, how did you like the play?"

Mon, 06/29/2015 - 18:50 | 6251707 ramgold2206
ramgold2206's picture

The whole project is ego driven... no different to every war (hot, cold or financial) that has ever been fought... what amazes me is how the bullshit continues on in this Fiat currency, nothing is as it seems, upside down world.. Maybe the whole thing is a game/matrix of deception and the people are in a deeper sleep that we on ZH realise.

Regardless, I believe I woke from that sleep a year ago, got an alternative education on ZH and consequently got into gold bullion and now I want to give something back.

 

For those of you not actually in the physical metal .. I can highly recommend it.. because no matter what goes on in the EU Punch and Judy show... my stress levels reduced 90% knowing I have some bullion.

 

You might think I'm just spamming, but I'm not... I'm deadly serious!  I got involved in a German company called Karatbars International who produce Gold Bullion in small weights and boy am I glad on so many levels.

 

They developed an incredibly lucrative affiliate marketing system to get their product to market... Its free to join at the basic level although if you decided to go all in to earn the highest commissions the buy in price is essentially peanuts... FFS my day job Personal Indemnity insurance costs more per month!!

 

The downside is it's more a mass education programme than marketing,,, because aside from ZeroHedgers the financial IQ out there is well down the trickle down economic cascade and those people need to be educated to get some AU!

Mon, 06/29/2015 - 20:28 | 6252003 New_Meat
New_Meat's picture

"You might think I'm just spamming, but I'm not..."

well, child, we do think this is spam, not as good as the "earn 3k/hour" spam, but ... well ... weak.

- Ned

Mon, 06/29/2015 - 18:14 | 6251552 geno-econ
geno-econ's picture

"As good as it gets" for continued servitude, debt ,austerity and huimiliation of Greece by Bankers, IMF and Germany.  My take is it is a seminal moment in economic history wherby the Fiat money printing experiment is being put to the test by a nation that should never have been allowed to join a club of Global unequals.  The impact can easily spread to other nation states where money printing  enriches only the elites, and nations with the lowest wage levels, at the expense of middle class, seniors and those at poverty levels.  No amount of trade adjustment assistance can resolve this problem because the wealthy no longer are willing to share their ill gotten gains 

Mon, 06/29/2015 - 16:52 | 6251235 Goldbugger
Goldbugger's picture

?

Mon, 06/29/2015 - 16:51 | 6251231 Goldbugger
Goldbugger's picture

What's next? An enima.

Mon, 06/29/2015 - 16:37 | 6251154 large_wooden_badger
large_wooden_badger's picture

Zorba will gladly pay you Tuesday, for a gyro today

Mon, 06/29/2015 - 16:24 | 6251099 disabledvet
disabledvet's picture

"Free borrowing"? Bwhahahaha.

The irony in this author's complete IDIOCY is that in fact "GREECE" proves that Econ Does Matter!

Capital Controls?

More like CAPITAL RUN WILD as the entire GREEK Economy goes Underround (save for fucking ATHENS of course.)

Yeah..."Econ matters."

Silver got SLAMMED today...because it "doesn't matter."

Nay, verily...the exact opposite is true "but none can be had at any price."

Move along...

Mon, 06/29/2015 - 16:51 | 6251228 LawsofPhysics
LawsofPhysics's picture

"Silver got SLAMMED today" --  Odd, all my ounces are still intact...

yes, move along you stupid old fuck.

Mon, 06/29/2015 - 16:16 | 6251048 KnuckleDragger-X
KnuckleDragger-X's picture

Server poop.....

Mon, 06/29/2015 - 16:15 | 6251045 KnuckleDragger-X
KnuckleDragger-X's picture

It'll wind up being a big selling point for the various nationalist parties, " look what they did to Greece, they want to do the same to us". Portugal might be another Greece soon and Italy is already pissed, plus throw in LePen in France and you have a clusterfuck of massive proportions forming.....

Mon, 06/29/2015 - 16:05 | 6250981 HenryHall
HenryHall's picture

Hopefully they have it all carefully planned out and we are due some surprises.

Such as Drachmae at par with Yuan or Rubles (with Chinese or Russian backing for such a move because it wouldn't work without such backing). One country, two currencies.

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