Greeks woke up this morning to shuttered banks, after the European Central Bank voted on Sunday against extending liquidity assistance past the already approved cap. The ECB will revisit its decision on Wednesday, but it’s hard to see how it can send more money to beleaguered Greek bankers since the eurogroup voted on Saturday to revoke its offer. Meanwhile, on Wednesday Greece is due to miss its payment to the IMF and will be judged to be in default. While Greek PM Alexis Tsirpas has called for a referendum on July 5, this has an uncertain future: some of the measures taken to stem the bank panic may have made Grexit more or less inevitable (it’s also difficult to understand what exactly the referendum is going to be on, given that the offer which was to be voted on is presumably no longer on the table.)
Prophecies of doom should not be overstated in the wake of this news. For Europe as a whole, the news may actually turn out to be good, at least in the long term. As Walter Russell Mead wrote on Sunday, the eurozone will finally get to cut loose a member state that never should have been allowed to join in the first place, and gains some much-needed time to reexamine its long-term trajectory.
For the Greeks, on the other hand, things are about to get wild. Currency controls are much harder to undo than to put in place. The eurozone creditors (and the IMF) as much as the debtors are making things up on the fly, but the crew leading Greece has proven to have an especially uncertain hand on the tiller.
For your average Greek, the financial results are fairly dire. As The Financial Times reports:
The shutdown of the banks will last until at least July 6 and cash withdrawals will be limited to €60 a day, according to a Bloomberg report citing a statement by the Greek government.
The cashing of cheques will be halted and fixed term deposits will be locked down. The Athens stock exchange will also be closed.
For the country as a whole, meanwhile, the range of possibilities that lie ahead are wider (and weirder) than one might think. As WRM noted in February, analogies to the present situation in Athens may more easily be found in Latin America than in northern Europe. Greece, like many Latin countries, has historically been subject to a cycle of populist failure, doubling down on demagoguery, and then backlash. Whether Grexit will lead to backlash or doubling down remains to be seen, but while the Greeks may come to their senses, Caracas on the Aegean is also not beyond the realm of reason. (The West is frankly lucky that Russia is so poor right now, but Moscow still could cause some real problems as its Orthodox “little brother” tries to find its way.) And grim as all of this is, it also supposes that contagion will not spread to the wider European markets—in which case, we may well have bigger problems to worry about.
Many have been eager for the Greek crisis to finally break, if only from a desire to “get it over with.” But there are reasons why the eurocrats fudged and hemmed and hawed for so long on this one. What’s done is done, though, and we are likely finally to see, one way or the other, how Grexit will really play out.