FOR almost three weeks now banks have been closed in Greece. Cash withdrawals have been limited to €60 a day and in practice often just €50 a day. Electronic transfers to accounts outside the country have been blocked. Although people are no longer queuing at ATMs, the shuttered premises of banks have become part of everyday life. Despite the everyday bustle of cities like Athens, Greece has been reverting to a cash economy, in part because so much cash had already been withdrawn before the bank closures, with a total of around €45 billion (worth a quarter of Greek GDP) stuffed under mattresses.
The slow-motion bank run has occurred as Greeks have feared for the safety of deposits that might turn overnight from hard euros to worthless drachmas as Syriza, the radical-left party led by Alexis Tsipras that won power in January, played a reckless game of brinkmanship with the rest of the euro area, and in particular with Germany. Though the aim was avowedly to secure a better deal for Greece, all it did was to injure the economy. The game of bluff culminated in a far worse deal on July 13th following the bitter negotiations in Brussels last weekend between Mr Tsipras and other euro-zone leaders, preceded by even sourer talks between the Eurogroup of finance ministers, in which Wolfgang Schäuble, the German finance minister, pressed the case for Greece to leave...Continue reading
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