Web Desk: What do Greek banks still offer their customers?
As things stand, Greeks with debit/credit cards can withdraw €60 a day (in practice €50 as most cash machines have run out of €20s), can make online transfers within the country and can pay with their cards in shops that still accept them.
Many shops and cafés don’t have card machines, those who do have started to refuse card payments because they no longer believe that plastic money can be converted into “real” money.
Greeks are no longer able to buy stuff abroad because this would count as a “currency export”, which the government wants to prevent.
This will take its toll on the business side as Greece heavily relies on the imports of raw material. This will affect the production process as the manufacturers would be able to produce as long as the last remnants of the raw materials are available.
As there is low cash in the banks, they exporters are either rejecting the orders or demanding real cash. Redundancies are already starting to happen as businesses slim down to counter losses.
Whereas some of the bigger businesses with bank accounts abroad or foreign income streams are able to circumvent some of these controls by using their foreign bank accounts to pay suppliers, most family-run businesses and smaller firms—the backbone of the Greek economy—are not so lucky.
Some Greeks of means are reportedly going on spending binges, buying expensive goods in order to empty their bank accounts.
Food and petrol sellers have been the big winners, so to speak, of the past week as people hoard dry foods and fill up on petrol to prepare for potential severe shortages in future.
Many reports drop in sales of 25%-50. Domestic production is falling as a consequence, which suggests that a sharp rise in unemployment may soon follow.
Greece is a more cash-reliant economy than other European countries and small businesses in particular pay both suppliers and employees in cash.
Capital controls have quickly thrown normal pay arrangements into chaos, and businesses are increasingly resorting to delayed payments, forced holiday for employees, and layoffs.
Large Companies such as supermarkets have stopped putting all their cash earnings back into banks and are holding on to over 50% of it. Those who still use banks for deposits say they do so in order to pay staff electronically. Cash-heavy businesses that have stopped paying into banks have started to pay staff directly in cash.
Since the European Central Bank capped its emergency lending to the Greek banking system over a week ago, no new money has flowed into bank coffers to replace the cash being withdrawn a bit at a time by nervous depositors.
Each day brings the banking system closer to the moment when one of the larger institutions can no longer provide money to depositors. At that point the banks will need to be propped up with non-euro notes printed by the Greek government.
In the positive case, Greece will then begin the rocky process of untangling itself from the euro area, giving way, within a year or two, to economic life with the drachma and without capital controls.
Yet a more negative outcome is a possibility: one in which banks and businesses go belly up as the government struggles to restore a functional payment system, in which imports dry up for lack of foreign exchange, and Greeks of all sorts flee a crumbling country.
Source: The Economist