Batten down the hatches, it could get bumpy!
Greeks woke up to shuttered banks, closed cash machines and a climate of rumours and conspiracy theories on Monday as a breakdown in talks between Athens and its creditors plunged the country deep into crisis.
After receiving no extra emergency funding for Greek lenders from the European Central Bank, Prime Minister Alexis Tsipras sombrely announced capital controls in a televised address on Sunday night to prevent banks from collapsing under the weight of mass withdrawals.
Greece has less than 48 hours to pay back 1.6 billion euros ($1.77 billion) of International Monetary Fund loans, and a default would set in train events that could lead to the country’s exit from the euro currency bloc.
But after Tsipras angered Greece’s international lenders by announcing a snap referendum next Sunday on the terms of a cash-for-reforms deal, hopes of a last-minute breakthrough are fading fast. Greeks reacted with a mixture of disbelief and fear.
European bank shares fell sharply on Monday. Top banks in Spain, France and Germany were down more than 6 percent as the risk of a spillover to banks in other peripheral euro zone countries spooked investors.
The Greek government will keep banks shut at least until after July 5, the date of the referendum, and withdrawals from automated teller machines — which are shut on Monday — will be limited to 60 euros a day when they reopen on Tuesday. The stock exchange will also stay shut.
After months of wrangling, Greece’s exasperated European partners have put the blame for the crisis squarely on Tsipras’s shoulders.
The creditors wanted Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.
I’m not an expert in international finance, but I know what a money pit is. Greece has been spending more than they are collecting in taxes. A lot more. For a long time.
The people they owe money to don’t want to loan them any more money. But Greece is dependent on that borrowed money. The creditors wanted Greece to agree to some “austerity” measures which basically means “spend less.”
That solution went over like a lead balloon. So they turned around ans elected a demagogue (Tsipras) who promised to keep the government gravy flowing.
Reality is a bitch.
So what happens next? I don’t have a clue.
The reason this matters is because we are 18.5 TRILLION dollars in debt. We could be next. Sooner or later it will be our turn in the barrel. It won’t be pretty.