Greece’s central bank has issued the clearest warning yet that the country is on course to default on its sovereign debt at the end of the month and crash out of the single currency, while finance ministers across Europe also confirmed they are making contingency plans for a messy ending to the crisis.
Athens is due to repay €1.6bn to the International Monetary Fund on 30 June but will be unable to do so unless its creditors release a €7.2bn bailout payment before then.
The central bank said some €30bn in deposits have fled the Greek financial system since last October as Greek savers shift their money ahead of a possible exit from the euro.
The German Finance Minister, Wolfgang Schäuble, told a parliamentary hearing in Berlin that his government is making contingency plans in the event of Grexit.
“We are prepared for all eventualities” said the Dutch Finance Minister, Jeroen Dijsselbloem, in the Hague. The Chancellor, George Osborne, also confirmed that the UK has stepped up planning to deal with the economic fallout.
If Greek defaults, the European Central Bank could cut off its support to the Greek financial system, forcing Athens to impose capital controls, limiting the amount that savers can withdraw from their accounts and curbing transfers of money overseas. When imposed in other countries, such controls have prompted queues outside bank branches as people try to remove as much cash as possible, and wider turmoil in financial markets as foreign investors realise they cannot pull their money out.
Full article: Greece could be forced to lock down savers’ cash as debt crisis worsens (The Independent)