Author Topic: What happens after July 1st?  (Read 845 times)

Offline Steve Jones

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What happens after July 1st?
« on: June 15, 2015, 09:19:34 PM »
With the financial situation in Greece deteriorating by the day, and with no sign of an agreement between the state and it's creditors before the end of June, it is starting to look desperate.

Thursday 18th June looks like a crunch day, if no agreement is reached, then the ECB, IMF and other creditors will then start fully preparing for the effects of a Greek default.

Assuming that the current stalemate remains unbroken, it is really unclear about what happens if Greece does default.

There are public sector salaries to be paid at the end of the month (emergency services, civil aviation authorities, local authorities etc.).

If the bailout credit facility is withdrawn (and the probability it seems at the moment looks high), then the credit lines currently available from the ECB to keep the Greek banking system going dries up instantly.

The Greek banks also have outstanding loans to prop up the state and with their liquidity disappearing overnight, within a short space of time, drastic measures may have to be imposed to prevent a run on their assets as depositors try desperately to withdraw their savings

To avoid this the banks may prevent access to their accounts and the value of any savings will plummet (especially if a new currency or a parallel system to the euro is adopted).

Alternatively if controls are similar to those applied in recent years in Cyprus, many depositors with significant savings may find that these are virtually wiped out overnight.

There is also the issue of how essential services are maintained. Law and order, hospitals, energy provision.

The least of their worries but still a big driver to the Greek economy is tourism and if there is no air traffic control (salaries remain unpaid), you have no flights into the mainland or the islands.

I desperately hope that this doomsday scenario doesn't happen, but they will be in unchartered waters with no president, who knows what happens next?

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