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Anastasia Balezdrova

Two days after the government decided to call a referendum on the agreement with creditors Greece woke up to closed banks and capital controls. The mass withdrawal of deposits began minutes after the announcement of the referendum and hours later, many of them were empty.

Under the legal order of the government, banks are set to open next Tuesday. However, analysts point out that this is most unlikely and entirely dependent on the outcome of the referendum that will take place this coming Sunday. Such is the opinion of economic analyst Kostis Lympouridis whom GRReporter asked for comment.

Mr. Lympouridis, how could Greek banks reopen and under what conditions?

The European Central Bank has suspended the increase of the Emergency Liquidity Assistance limit for Greek banks because the willingness of Greece to negotiate an agreement with creditors is under question. Consequently, there is no other way to cover the deficit between deposits and loans. On the other hand, the increased withdrawal of deposits that has caused insecurity has worsened their state of liquidity. Because of these two factors, banks have closed and capital controls have been imposed.

Whatever the outcome of the referendum, neither of the factors could be overcome in the short term and therefore banks would not reopen immediately. I think if the negative vote prevailed, the next step would be to pay salaries and pensions in IOUs (informal documents for financial liabilities that will be redeemed at a later stage) and then subsequently to introduce another currency. In this case, banks would reopen and would operate with another currency.

If the response "yes" prevailed, political changes and a new government would be logical, the purpose of which would be to reach an agreement. In this situation, banks would be able to reopen and the situation would return to normal.

Until recently, the leading opinion was that the possible problems in the functioning of parent Greek banks would not affect their subsidiaries in the neighbouring Balkan countries. Today, however, there are assessments that indicate the contrary. Do you think it is possible for Greek banks to lose their subsidiaries like Cypriot lost theirs in Greece two years ago?

It is a possible opinion that the subsidiaries of Greek banks might bring the Greek crisis to the countries where they are established and functioning. This could happen in the event of a mass withdrawal of deposits (bank run) from the subsidiaries, which would require the relevant central banks to take measures to support them. However, this issue has not only economic but also political parameters, I could not predict what would happen.

What political events could we expect if the negative response to the referendum prevailed and if the majority voted in favour of the positive?

As I said, if "yes" prevailed, political events would most likely follow that would probably lead to the formation of a new government, perhaps a government of national responsibility that would work to reach an agreement with creditors.

If the response "no" prevailed, Greece would enter uncharted waters. As already mentioned, the next step would be to pay salaries and pensions in IOUs and introduce another currency. Because I do not consider this government as being able to make a plan and implement such a thing, and because this would cause severe impoverishment and unrest, in my opinion it would collapse in the summer under pressure from violent public protests.