Image Source: Telegraph.co.uk
Greek Prime Minister Alexis Tsipras stated that he does not want a rupture with Europe but he may not be able to avoid a rupture with the euro, in a latest development on the crisis.
The thing that raised browse was that the PM echoed the exact words of a top banker when warnings had been issued that the European Central Bank’s [ECB] decision to freeze emergency lending to Greek banks a week ago is causing a humanitarian disaster. Even encumbered by savage restrictions on cash transfers and withdrawals, Greek banks are literally just days away from running out of cash and collapsing completely.
Under these awful circumstances, not only would millions of Greeks lose their savings, but companies would collapse. And Greece would run out of vital imported food, raw materials and medicine. Banks, meanwhile, are desperately in need of a lender of some sort of a “last resort” to save them, and the Greek economy.
The only two options that lie ahead of the total collapse are either The Bank of Greece could make unsecured loans to Greek banks without the ECB’s permission – which would provoke a furious reaction from Eurozone leaders and would be seen by most of them as tantamount to leaving the euro, or it could explicitly create a new currency, a new Drachma, which it could then use to provide vital finance to Greek banks and the Greek economy.
This gigantic risk, of a Greek exit from the euro, is tonight preoccupying governments, central banks and investors all over the world. Monday is scheduled to be a “very hairy day” on markets.
Although the ECB is expected to continue to refuse to rescue Greek banks, it will chuck billions of euros at bond markets, to prevent the borrowing costs of other vulnerable euro economies rising too far and too fast.
Tags: Alexis Tsipras Greece Greek economy
