Tuesday, 30 June 2015

Update on Greece, their referendum, Chancellors statement and advice to tourists / businesses

The situation in Greece is moving very quickly but here are the key facts. Capital controls / withdrawals and bank closures are in effect, certainly until the result of the sudden referendum next Sunday, of which more below.

Greece’s financial assistance programme is due to expire today. It had looked likely that a deal to extend that programme would be agreed last week, but last Friday the Greek Prime Minister suddenly announced that there would be a referendum on 5 July on the terms of the programme extension, and that he would recommend that the Greek people vote no. On Saturday, the Eurozone Finance Ministers confirmed that, as a result of that unexpected move, negotiations were at an end and the programme would expire. This is the emergency life support for the Greek banking system, and Sunday night the Greek Government announced that banks would not open on Monday and that capital controls would be introduced. It is fair to say that Billions had been taken out of the banks over the last few weeks by local Greeks.

What this means for the North East tourist or business visitor is that it is largely cash only if you are travelling to Greece. Put simply take more euros if you are travelling. The Chancellor spells out the details in his statement below but it appears that the present position is as follows:
  • Banks closed till 6 July
  • Cash withdrawals limited to €60 (£42; $66) a day for this period
  • Cash machine withdrawals with foreign bank cards permitted
  • Pension payments not part of capital controls
  • Banking transactions within Greece allowed
Credit cards should be taken most places but best to check in advance, and that position may deteriorate as well.

Yesterday the Chancellor came to give a statement to the Commons: this is the full text, plus the Q and A that followed.

The referendum question posed by the Greek government [who seem determined not to accept any deal] is worryingly opaque and unclear:
The Greek government clearly wants a No to this question. Where it goes for money and lending thereafter if there is a No vote is hard to assess, as the country has imposed bank restrictions and capital controls, and that is always the beginning of the end, as the Greek voters are voting with their own personal wallets and not trusting their own government. Even if they vote Yes it is going to be difficult for the people in Greece; but dealing with your creditors is always better than pretending they don't exist and calling them unfair or worse; if Greece does exit the Euro and its economy goes even further into freefall there will be an impact to us in the North East as instability is inherently a bad thing, and this will be a very big shock to the world financial system. We, in the UK, are in better shape than most but this is going to be a bumpy ride for us too.