Greece rules out capital controls if bailout talks fail

Associated Press

ATHENS

Greece’s government on Monday ruled out restricting access to bank accounts and the free movement of money if there is no breakthrough soon in tortuous talks with bailout creditors and its dwindling cash reserves dry up.

The possibility of imposing capital controls – part of a chain of events that could lead to Greece leaving the euro if things take a disastrous turn – “simply does not exist,” said Gabriel Sakellaridis, spokesman for the radical left-led government.

He spoke after a senior opposition conservative lawmaker was quoted as saying capital controls could be imposed this coming long weekend – June 1 is the Orthodox Pentecost holiday – or shortly after if the government is unable to make a loan repayment due to the International Monetary Fund on June 5.

Greece has survived for the past five years on rescue loans from the IMF and its European partners. But the creditors have held up the rescue loans as long as Greece does not agree to make new economic reforms. Officials in the governing Syriza party say salaries and pensions have priority over loan repayments if push comes to shove amid a growing liquidity crisis.

Experts say Greece eventually could have to impose capital controls to prevent a bank run, when depositors flock to bank branches and ATMs to withdraw their savings. An estimated $33.5 billion have already flowed out of Greek banks since elections were called late last year, but a more sudden surge in withdrawals would cause the banks to collapse.

Such a panic could be triggered by the country failing to make a payment to the IMF, or any other creditor, or being unable to fully pay pensions and public sector salaries.