Greek banks are running out of cash even after the government last week placed limits on how much depositors can withdraw each day. The European Central Bank has been providing emergency credit to the banks, but on Monday said it could not increase the amount offered because the collateral that the banks post is weaker now due to the crisis.
Several reports from global banks and investment firms on Monday predicted the country will have no choice but to exit the euro and issue its own currency to relieve the cash crunch. A so-called “Grexit” from the euro is considered one of the biggest risks facing the global economy.
“The prospects of Greece remaining in the eurozone have suffered a setback,” said Bill O’Neill, head of the U.K. Investment Office at UBS Wealth Management. “A deal to keep Greece in the eurozone remains possible, but the odds against a successful conclusion have now lengthened.”
Sung Won Sohn, an economist at California State University, said that he expects a Greek exit and that that will push up the value of the dollar as investors scramble for safety, making U.S. exports more expensive.
“Our economic growth will be slower, and in Europe, whose economy is the most important for the U.S., growth will slow,” he said.
Others are more optimistic.
Russ Koesterich, chief strategist at giant money manager BlackRock, wrote in note to clients that he doesn’t think the Greece crisis poses a “longer-term” threat to the global economy or financial markets.
On the ground
Nicky Zachary, a family business owner in Greece, thinks Greeks have become united in rejecting austerity through its landmark no-vote in a nationwide referendum.
“My father opened this shop in 1965 and I don’t want to close it,” she says. “[Greeks] can live with very little and can live through difficult situations. And, I think that after the referendum, the Greek people are united. I don’t want to lose the dream for a better Greece; I want to have hope for a better deal.”
There was pride and defiance in Athens after a lopsided victory for the no-vote forces that wanted the Greek government to reject the demands of European creditors for more austerity measures, including further cuts to pensions.
“Something happened last night with the Greek people,” says George Papadokostakis, 34, owner of a coffee shop. “We were in a dead-end situation, [but] with the no-vote we believe there may be something better.”
Zachary says she has taken in 100 euros (US$110) in sales since the capital controls were imposed June 28, 2015. That’s disastrous for a shop with a monthly 2,500 euro (US$2,760) overhead for rent, taxes, utilities and other costs.
She has cut prices by 25% or more to lure customers, but it’s not yet working.