Due to an accelerating bank run in Greece, the European Central Bank (ECB) announced today they have cut off funding to Greek Banks, forcing the banks to close until further notice.
Panicked citizens have been standing in long lines around the clock this weekend withdrawing euros from ATM machines. It is estimated over one billion euros have already been withdrawn from ATM’s this weekend, forcing a liquidity crisis for banks. Grocery stores and gas stations are also getting cleaned out as people are immediately converting their cash into real assets.
The only thing allowing the Greek banks to remain open was their access to Emergency Liquidity Assistance from the ECB. Now that those funds have been cut off, Greece is quickly running out of cash. The government will now be forced to implement capital controls further limiting the amount of cash citizens can withdraw from ATM machines.
The euro has already plunged today by over 200 pips against the dollar, which is a big move in the Forex market. It equates to about 2 cents for EUR/USD. In the United States, stock market futures are already down over 300 points. Stock futures indicate how the market is likely to perform during the next business day, but are not always an accurate predictor.
After weeks of failed negotiations between Greek Prime Minister Alexis Tsipris and the ECB, Tsipris rejected the ECB’s final offer for a bailout last week. Tsipris said he refused to be blackmailed into submitting to their demands to cut spending on pension plans for Greek citizens.
Greece’s current bailout package expires on Tuesday, June 30. Without additional bailout funds, Greece will default on a 1.5 billion euro payment, which is due to the International Monetary Fund (IMF) by Tuesday, June 30. A Greek default puts the entire European Union in danger because their financial institutions would be forced to write off a 320 billion euro loss. It is not likely the European sovereign governments would be able to bailout the banks due to their large debt loads, which have grown bigger every year since the 2008 financial crisis.
Tsipris called for a nationwide referendum in which the people of Greece will vote whether or not they want to stay in the European Union. Their choice is to either accept the austerity measures required in the bailout package or leave the EU and begin the process of rebuilding their failed economy. The referendum is scheduled for next Sunday, July 5.
In an interview this weekend, IMF Director Christine Lagarde called the Greek referendum irrelevant because the bailout offer expires on June 30. So even if the people vote in favor, the offer might no longer be available. However, she later said the IMF might be willing to extend the offer if the people of Greece approve it.
The latest move by the ECB and the comments by Christine Lagarde appear to be hardball tactics to increase pressure on Greece to accept the terms of the bailout package. They certainly have everyone’s attention now.
Given the current desperate conditions in Greece, it seems unlikely the people would reject the bailout offer, which includes over 16 billion euros in immediate funding. Approving the offer would at least buy them a little more time. Given the choice to start suffering today or postpone the suffering for another few months, it seems likely most people would opt to postpone their suffering.
The current panic could turn into a celebration if the bailout package is approved next Sunday. Highly volatile price movements for stocks and currencies are likely over the next couple of weeks. However, even if the European Union dodges this bullet they still have serious trouble coming soon with an escalating war in Ukraine and the threat of a derivatives meltdown in Germany’s largest bank, Deutsche Bank, due to rising interest rates over the past six weeks.
It appears the ECB and IMF are just as desperate as Greece. Why else would they want to extend another 16 billion euros to a nation that has zero chance of repaying? Bank loans are extended on the basis of credit worthiness. Since Greece has zero credit worthiness there must be another explanation for the bailout offer.
Could this be the trigger event that Elvis Mbonye saw coming? He saw the U.S. stock market plunging in June/July 2015. See my previous post: Elvis Mbonye: U.S. Economy Will Plunge in June/July 2015. We’ll find out very soon!
Author: James Bailey
James Bailey is a blogger, business owner, husband and father of two grown children. In 1982, he surrendered his life to the Lord Jesus Christ. In 2012, he founded Z3news.com to broadcast the message of salvation by reporting end time news before it happens.
© 2015, Z3 News. The first 200 words of Z3 News articles may be shared online in exchange for a clickable link to our site. Please include the author name and do not make any changes to text or titles. No image files from our site may be shared because we don’t own them. For permission to use our content in other formats, please contact us.