'Capital controls imminent' as money floods out of Greece's banks and default looms

Pro-EU rally Greece Athens flagMilos Bicanski/Getty ImagesPro-European Union protesters take part in a rally in front of the parliament on June 18, 2015 in Athens, Greece. Thousands people attended the rally in support of Greece remaining in the EU.

After yet another failed summit, the blame and recriminations started as soon as Thursday’s Eurogroup meeting broke up. Greece is now just 11 days away from its next major debt repayment, which it almost certainly can’t make without a bailout deal.

“Capital controls imminent without breakthrough,” is how Barclays analysts headlined their morning email on the subject.

On June 30 Greece owes €1.5 billion ($US1.70 billion, £1.08 billion) to the International Monetary Fund (IMF) that the government almost certainly doesn’t have.

It then owes another €3.5 billion (£2.51 billion, $US3.97 billion) to the European Central Bank (ECB) on July 20.

Without the cash, the country could default on its debts and tumble into a painful process which led to it leaving the eurozone. That’s not something that the Greek people want, but they’re also firmly against the

There were two major, emergency developments from the Eurogroup meeting.

Firstly, an internal leak told Reuters that ECB executive board member Benoit Coeure said “tomorrow, yes. Monday, I don’t know,” when asked if Greek banks would be able to stay open. The ECB denied the report, and is hosting an emergency call today on the provision of Emergency Liquidity Assistance (ELA) to Greece — the last thing that’s propping up the banking system.

Secondly, with no breakthrough from the bloc’s finance ministers, the eurozone’s heads of government will meet for an emergency summit on Monday. The timeline for a potential deal (even if both sides were able to reach one) is now incredibly tight, since an agreement really needs to go through national parliaments before June 30. It’s not clear if Prime Minister Alexis Tsipras will be any more likely to agree to what’s on the table than finance minister Yanis Varoufakis.

Varoufakis had his own laundry list of suggestions for a deal, which he published straight after the meeting finished.

There are now a lot of people saying that the end is nigh (which it may well be), and that a deal must be reached — but they’re offering somewhat less detail on who they think should give up on their position.

After some progress on elements of the deal, the situation has now been practically static for over a month, with the two sides simply too far apart on issues like reforms to Greece’s pension system, whether to cut or hike VAT, and how to change labour market laws. One side will have to fold in some way for a deal to be reached.

Tsipras is in Russia on Friday, and has a meeting with President Vladimir Putin, so for anyone expecting a last minute bailout from Moscow, now is the time.

There’s a graphic from that Barclays note this morning (right) showing just how dreadful the situation with Greece’s banks is, with deposits leaking away at a rapid pace.

The amount of money in Greek banks has been practically cut in half over the last six years, and after a halt in the collapse from mid-2012 to mid-late-2014, the plunge has begun again, at an even faster pace.

According to Reuters a further €2 billion (£1.43 billion, $US2.26 billion) was withdrawn from Greek banks on Tuesday, Wednesday and Thursday alone.

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