Selasa, 12 Juni 2012

EU 'could limit withdrawals from ATMs' if Greek exit tips eurozone into crisis

EU 'could limit withdrawals from ATMs' if Greek exit tips eurozone into crisis

By Adrian Lowery

PUBLISHED: 06:28 EST, 12 June 2012 | UPDATED: 06:31 EST, 12 June 2012


European Union officials have discussed measures to stop mass withdrawals from cash machines, a report claimed today, if a Greek exit were to tip the eurozone into a deeper crisis.

Finance officials have also discussed imposing border checks and introducing eurozone capital controls, in order to check a possible flight of funds, according to Reuters news agency.

The officials stressed they did not expect Greece to leave the euro and the ideas were from a range of contingency plans - but the preparations indicate the gravity which EU leaders are attaching to a potential Greek exit.

Fragile: Any strong indication that Greece was about to leave the euro would see a run on bank deposits

Fragile: Any strong indication that Greece was about to leave the euro would see a run on bank deposits

Greek elections on Sunday could see angry voters back radical left-wing parties opposed to austerity â€" pushing Athens closer to an exit from the euro.

James Hickman, managing director of Caxton FX, the contingency plan in case Greece drops out of the single currency is 'hardly surprising'.

'The situation in the eurozone is worrying to say the least and any responsible institution should of course be preparing for the worst case scenario,' he added.

Stock markets across Europe were steady today after yesterday's rollercoaster ride in the wake of Spain obtaining £80billion from the EU to shore up its banking system.

But both Spanish and Italian 10-year government bond yields were trading at 6.5 per cent, as investors worried how Spain's debts would be repaid - close to the 7 per cent level that is seen as unsustainable, and which triggered bailouts in Greece, Ireland and Portugal.   

Italy, as well as Cyprus, came into the eurozone firing line last night after the Spanish bailout failed to inspire a lasting boost for markets. Early euphoria evaporated as investors fretted about the details of a Spanish rescue and which country would be next to need support.

Kathleen Brooks, an analyst at Forex.com, said: 'Throughout this crisis Europe’s periphery has been personified as a pack of dominos â€" if one falls then others will follow. So now the attention turns to the next domino.'

Cyprus, which is heavily exposed to Greece, hinted that it may need a bailout by the end of the month â€" both for its banks and the country as a whole.

'The issue is urgent,' said finance minister Vassos Shiarly. 'We know the recapitalisation of the banks must be completed by June 30 and there are only a few days left.'

It is feared that Cyprus may be followed by Italy and the country’s borrowing costs soared as the crisis threatened to spread to Rome.
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Official figures in Italy showed the economy shrank 0.8 per cent in the first three months of the 2012 â€" the sharpest decline for three years.

The terms of the Spanish bailout â€" widely seen as less onerous than for other countries â€" could also trigger demands for earlier rescues to be renegotiated.

It has stoked popular anger in Greece, where the 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 euro.

The EU source told Reuters that the Eurogroup Working Group - which consists of eurozone deputy finance ministers and heads of treasury departments - has also discussed the possibility of suspending the

Schengen agreement, which allows for visa-free travel among 26 European countries, with the aim of limiting a bank run or capital flight.    

'Contingency planning is underway for a scenario under which Greece leaves,' one of the sources, which Reuters said has been involved in conference calls on the plans, 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.    

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