Xinhua, Athens :
Ahead of Sunday’s referendum, while Greek citizens will decide in favor of or against a new debt deal with the country’s creditors, the question is how soon the banking system can recover from the capital controls introduced.
Experts attribute the measures of the bank holiday and capital controls to political uncertainty, in contrast to Cyprus where a bank default occurred.
“If the political instability is restored and as a member of the eurozone, you may have a faster recovery. This will depend on the solution given,” Panagiotis Petrakis, Professor of Economics at the University of Athens told Xinhua.
According to Petrakis, if capital controls remain for longer period, that would lead to the decrease of the gross domestic product (GDP) by 5-7 percent of the Greek economy over the year and an increase in the unemployment again.
“For the last two years unemployment was reduced by 100,000 per year. If you change that course and increase the unemployment by 50,000 to 100,000, it will be a social disaster,” he added.
Over the last days, savers who queued in front of ATMs to withdraw 60 euros and pensioners lining up outside a limited number of bank branches to get their pensions traumatized Greeks’ trust in the banking system.
“This bank run was a serious wound in the transaction civilization of Greeks, they are not going to forget it easily,” Petrakis highlighted.
As people lose their trust in the banking system, a new situation is needed in the next months to restore people’s trust, according to Petrakis.
What are the scenarios of the outcome of the referendum and how near is a possible Grexit?
According to Petrakis, there are three possibilities, to have a “No” with an immediate agreement, to have a “No” with no agreement and to have a “Yes”.
If a “No” vote with no agreement comes up, then Greece will go towards “uncharted waters”, as Petrakis highlighted.
But, either way a scenario of a complete collapse of negotiations leading to a Grexit and return to drachma is “far from to be in the near future.”
“There is a default procedure within Europe. First these conditions will be exhausted and then you have to think for other solutions. I don’t think we have to think on that direction. Maybe we may think on the direction of default within Europe and there are mechanisms for default within Europe,” he said.
In the question if a compromise agreement is still feasible, Petrakis expected negotiations to resume over a new deal.
With the attention to the next payment to the European Central Bank due in late July, Petrakis stressed that the pressure will be so tense in order to reach a new deal by then.
Ahead of Sunday’s referendum, while Greek citizens will decide in favor of or against a new debt deal with the country’s creditors, the question is how soon the banking system can recover from the capital controls introduced.
Experts attribute the measures of the bank holiday and capital controls to political uncertainty, in contrast to Cyprus where a bank default occurred.
“If the political instability is restored and as a member of the eurozone, you may have a faster recovery. This will depend on the solution given,” Panagiotis Petrakis, Professor of Economics at the University of Athens told Xinhua.
According to Petrakis, if capital controls remain for longer period, that would lead to the decrease of the gross domestic product (GDP) by 5-7 percent of the Greek economy over the year and an increase in the unemployment again.
“For the last two years unemployment was reduced by 100,000 per year. If you change that course and increase the unemployment by 50,000 to 100,000, it will be a social disaster,” he added.
Over the last days, savers who queued in front of ATMs to withdraw 60 euros and pensioners lining up outside a limited number of bank branches to get their pensions traumatized Greeks’ trust in the banking system.
“This bank run was a serious wound in the transaction civilization of Greeks, they are not going to forget it easily,” Petrakis highlighted.
As people lose their trust in the banking system, a new situation is needed in the next months to restore people’s trust, according to Petrakis.
What are the scenarios of the outcome of the referendum and how near is a possible Grexit?
According to Petrakis, there are three possibilities, to have a “No” with an immediate agreement, to have a “No” with no agreement and to have a “Yes”.
If a “No” vote with no agreement comes up, then Greece will go towards “uncharted waters”, as Petrakis highlighted.
But, either way a scenario of a complete collapse of negotiations leading to a Grexit and return to drachma is “far from to be in the near future.”
“There is a default procedure within Europe. First these conditions will be exhausted and then you have to think for other solutions. I don’t think we have to think on that direction. Maybe we may think on the direction of default within Europe and there are mechanisms for default within Europe,” he said.
In the question if a compromise agreement is still feasible, Petrakis expected negotiations to resume over a new deal.
With the attention to the next payment to the European Central Bank due in late July, Petrakis stressed that the pressure will be so tense in order to reach a new deal by then.
