EU mulls blocking cash machines, borders in case of ‘Grexit’

ATM cash SEPA.JPG

European finance officials have discussed limiting the size of withdrawals from cash machines, imposing border checks and introducing eurozone capital controls as a worst-case scenario should Athens decide to leave the euro.

 

EU officials have told Reuters the ideas are part of a range of contingency plans. They emphasised that the discussions were merely about being prepared for any eventuality rather than planning for something they expect to happen – no one Reuters has spoken to expects Greece to leave the single currency area.

But with increased political uncertainty in Greece following the inconclusive election on 6 May and ahead of a second election on 17 June, there is now an increased need to have contingencies in place, the EU sources said.

The discussions have taken place in conference calls over the past six weeks, as concerns have grown that a radical-left coalition, Syriza, may win the second election, increasing the risk that Greece could renege on its EU/IMF bailout and therefore move closer to abandoning the currency.

No decisions have been taken on the calls, but members of the Eurogroup Working Group, which consists of eurozone deputy finance ministers and heads of treasury departments, have discussed the options in some detail, the sources said.

Belgium's finance minister, Steven Vanackere, said at the end of May that it was a function of each eurozone state to be prepared for problems. These discussions have been in that vein, with the specific aim of limiting a bank run or capital flight.

As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.

"Contingency planning is under way for a scenario under which Greece leaves," one of the sources, who has been involved in the conference calls, said. "Limited cash withdrawals from ATMs and limited movement of capital have been considered and analysed."

Another source confirmed the discussions, including that the suspension of Schengen was among the options raised.

"These are not political discussions, these are discussions among finance experts who need to be prepared for any eventuality," the second source said. "It is sensible planning, that is all, planning for the worst-case scenario."

The first official said it was still being examined whether there was a legal basis for such extreme measures.

"The Bank of Greece is not aware of any such plans," a central bank spokesman in Athens told Reuters when asked about the sources' comments.

The vast majority of Greeks – some surveys have indicated 75% to 80% – like the euro and want to retain the currency, something Greek politicians are aware of and which may dissuade them from pushing the country too close to the brink.

However, Syriza is expected to win or come a strong second on June 17. Alexis Tsipras, the party's 37-year-old leader, has said he plans to tear up or heavily renegotiate the €130-billion bailout agreed with the European Union and International Monetary Fund. The EU and IMF have said they are not prepared to renegotiate.

If those differences cannot be resolved, the threat of the country leaving or being forced out of the euro will remain, and hence the need for contingencies to be in place.

Switzerland said last month it was considering introducing capital controls if the euro falls apart.

Following an inconclusive election on 6 May, Greek parties abandoned efforts to form a government and called a new election for 17 June.

Only two political parties in parliament – the centre-right New Democracy (ND) and the Panhellenic Socialist Movement (PASOK) – support the EU-backed bailout programme and its related austerity measures, which they say have kept the country's finances afloat at the cost of massive social unrest.

However, ND (108 MPs) and PASOK (41 MPs) suffered unprecedented losses in the 6 May election, and did not have enough seats to secure a majority in the country’s 300-seat parliament, even if they had formed a coalition.

But other fringe parties – including the Neo-Nazi Chrissi Avgi party, the Stalinist KKE party, and the Coalition of the Radical Left (Syriza), which scooped a stunning second place at Sunday's elections – firmly reject the EU/IMF Adjustment Programme.

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