wolfstreet.com / by Wolf Richter •
As of midnight European time, Greece has become the first developed country in history to fall into arrears on payments to the IMF. It’s not that much money, by today’s standards: €1.6 billion. But for Greece, which is totally out of money, it’s an unreachable amount. The last time a country did such a thing was in 2001: Zimbabwe.
However the IMF ends up calling it in its institutional mumbo-jumbo, Greece has now defaulted on part of its debt. No one knows what’s going to happen next. Another emergency meeting is planned for Wednesday, so maybe….
Greeks have seen this coming months ago. So they yanked their money out of Greek banks with increasing determination, while they still could, starting last year. They have every reason in the world not to trust their banks. The withdrawals morphed into a “jog on the banks” last week.
When the central-bank spigot that had funded these withdrawals was turned off over the weekend, it brought the banks to their knees. The government, afraid of what would happen next, closed the banks for six working days. But re-opening the banks on day seven is going to be tough, unless new funding arrives in the interim. And Greeks now can’t get their money out, except in small amounts at the ATMs.
Whatever money they have left in the banks is now largely stuck there. All they can do is hope that they’ll get it back someday, in euros, not in drachmas, and not in form of equity in the banks.
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