Is it game over for Greece?

Vandalised Greek cash machine

The threat of “capital controls” now hovers over every Greek bank account

All eyes are on Sunday’s election results in Greece.

It has been cast as a referendum on the country’s future membership of the eurozone.

But could it be that the result no longer matters?

The steady withdrawal of cash by depositors from the Greek banks has reportedly accelerated in recent days.

And if this apparent bank run gets out of hand, there is a danger that Greece could find itself forced out the euro, whichever way its citizens vote.

Out of cash

Nobody knows who will win the elections – there has been an official polling blackout since 2 June – although, whatever the outcome, it will most probably be followed by many days of coalition negotiations.

The big question is whether the radical left-wing upstarts of Syriza will pip the established centre-right New Democracy to first place.

That would give Syriza a bonus 50 seats, making it by far the biggest party in the 300-seat parliament, though probably without a majority.

Syriza has vowed to reject the austerity programme agreed with Greece’s rescue lenders in the eurozone and at the IMF.

But her eurozone partners have made clear in that case, they would not make any more bailout money available.

The government would then literally run out of cash within a couple of months.

And if the government does not have enough money to repay its debts, then the Greek banks – who are among the governments’ biggest lenders – would be bust.

In which case, the European Central Bank would have no choice but to cut off its lending to the banks.

And that would mean the banks also run out of euros, in effect forcing Greece out of the eurozone.


This narrative makes it sound as though it is up to Greek voters to decide whether they stay in the euro.

Germany and Greece’s other lenders are saying: “Vote Syriza and you are out.”

But Syriza says that the Germans are bluffing.

In their view, the rest of the eurozone has way too much to lose from forcing Greece out.

Syriza says it would cause a financial panic that would soon engulf Spain and Italy, posing an existential threat to the single currency.

Last weekend’s bailout of Spain – which came with virtually no official strings attached – has seemingly strengthened Syriza’s argument that it can repudiate the far more stringent conditions that came with Greece’s own bailout.

Greece’s lenders have countered with tough rhetoric designed to influence the election outcome, as well as with what may turn out to be a very badly thought out “leak”.

Alexis Tsipras

On Tuesday, anonymous EU officials told Reuters news agency that they had discussed imposing capital controls on Greece if it leaves the euro.

“Capital controls” mean limits on how much money Greeks can withdraw from ATMs, or transfer – physically or electronically – across Greece’s borders.

In other words, the savings of Greek families and businesses would be frozen, so that they could be forcibly converted into new drachmas, which would presumably then lose half or more of their value against the euro.

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