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Greece's capital controls... for how long?

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Greece's capital controls... for how long?


Greek banks did not re-open on Monday, as the government imposed controls on capital, for one week, it said. Ordinary people queuing up at cash machines blamed the Eurogroup for refusing to prolong emergency assistance for Greece.

Prime Minister Tsipras, on Sunday, 28th June, told the nation:

“That Eurogroup decision has led to the European Central Bank curtailing the liquidity of the Greek banks, forcing the National Bank of Greece to suggest measures including a bank holiday and the restricting of withdrawals.”

The limit that can be taken out is 60 euros per day, per bank account.

This is restrictive in another sense: bank cards are not as common in Greece as in many other countries. Note that while debit cards are on a daily 60 euro cut-off, there is no limit on paying by credit cards. Payment is also possible by electronic transfer, but sending money out of Greece is suspended.

So far this year, 40 billion euros has been taken out of Greece’s banks — one quarter of total deposits.

Greece is not the first country in Europe to have imposed capital controls since the 2008 financial crisis. Cyprus shut its banks, which were overleveraged, for 12 days in March 2013.

Withdrawals were limited to five times today’s Greek limit, 300 euros per day, but that went on for a year.

Of customers’ savings over 100,000 euros, the Bank of Cyprus gave the customers shares worth just 37.5 percent. The government in this way contributed towards an IMF, European Commission and ECB bailout.

Iceland was the first European country during the 2008 crisis to clamp down on capital, late that year, after all three of the major privately owned Icelandic commercial banks defaulted.

Although it was more than a decade ago, the 2002 debt crisis in Argentina remains a dark period in many memories. Deposits were frozen in December 2001.

Withdrawals were limited to 250 dollars per week. Compare that to today’s limit in Greece.

Rioting led to the declaration by President Fernando de la Rua of emergency rule, his resignation, default on the public debt and extended economic and political turmoil.

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