Dimitris Katsikas - Hellenic Foundation for European and Foreign Policy Greece's cash trap
The economy is frozen and we're in a liquidity trap, where everyone wants to hold euros.
Investment is non-existent and consumption has collapsed.
People have stopped submitting tax income statements and with the banks closed the government cannot receive anything. Supermarkets don't know what to do with the cash they receive.
We are not in the eurozone bailout programme so the European Central Bank cannot increase funding to the banking system.
Credit agencies have reduced the ratings on Greek banks so they're almost junk and even if they have collateral to give they may not be able to get new funding. Plus, we are essentially in default of the IMF.
Even if there is a deal, capital controls will be here for some time because there would be a rush on the banks if they re-opened.
An interim solution would only calm the symptoms of the crisis. Under a more permanent deal difficulties would remain for some weeks.
This is why you don't want to fall in the whirlpool. Climbing out is next to impossible. |