(JD Heyes) The financial situation in Greece has gotten so bad that the government just ordered a mandatory transfer of all cash reserves from state-owned enterprises to the Greek central bank in order to avoid a complete economic collapse.
As reported by Britain’s Telegraph newspaper, the Greek government, citing “extremely urgent and unforeseen needs,” issued its emergency decree April 21. It requires all local government bodies to respond immediately.
The government’s decision was hastened by a degenerating cash crisis in the country that only grows worse by the day. Even the most conservative estimates noted that Athens is set to run out of money in just a matter of weeks.
The Telegraph further reported:
Despite the risk of violating its fiduciary obligations, the decree could now help the government meet its monthly €1.7bn wage and pension bill, averting a default on its own citizenry.
It is thought the confiscation of reserves held in commercial banks to the Bank of Greece could raise as much as €2bn for the government.
This is merely a one-time measure; what happens next month? That’s anyone’s guess.
Is a raid on personal accounts next?
“Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece,” said the presidential decree.
Greece was forced to restructure its debt in 2012, receiving hundreds of millions of dollars’ worth of bailout money from the International Monetary Fund and the European Central Bank. But now European central bankers are considering additional measures to keep Greece afloat financially.
“In a sign of the desperate measures being considered by Europe’s authorities, the European Central Bank touted the possibility of imposing capital controls in a bid to ease the liquidity strain,” said the Telegraph.
Vitor Constancio, vice president of the ECB, said the bank would consider that measure if Greece’s left-wing government requested it.
The last time capital controls were used was during the height of Cyprus’ banking crisis in 2013. As Natural News editor Mike Adams, the Health Ranger, reported at the time, banks in Cyprus managed to stay afloat then by raiding the private accounts of customers – a move that could eventually be repeated in Greece if the financial situation continues to worsen as expected.
Why is this expected? The current Greek coalition government was elected on a promise that it would end austerity measures imposed by the EU’s central banks as a requirement of any bailout, and it is not backing away from that promise. It should be noted that a major reason that austerity was imposed in the first place is because the Greek government was spending more on pensions and other handouts than it was taking in; without the austerity measures, it would do no good to simply hand Greece more money because eventually the government would be broke again.
Just like it is once again.
“Legal and constitutional issues”
However, as Bloomberg News reported, local government officials are none too thrilled with the edict from Athens:
As Greece struggles to find cash to stay afloat, local authorities say they oppose a government decision to use their reserves for short-term financing.
“The government’s decision to seize our reserves not only raises legal and constitutional issues, but also a moral one,” said George Papanikolaou, mayor of Glyfada, the country’s third-largest municipality in the metropolitan region of Attica, after Athens and Piraeus. “We have a responsibility to serve our citizens.”
He added that Glyfada has about 16 million euros in cash reserves.
The Greek government is simply running out of options, leaving Prime Minister Alexis Tsipras little choice other than to force local governments and central government enterprises to cough up whatever cash they have on hand, calling it an “investment” in “short-term” state debt.
Meanwhile, Tsipras will continue trying to convince skeptical foreign creditors to extend Greece new financial aid, which will prove difficult given the government’s obligations to pensioners and its inability to boost GDP.
If he can’t get new funding – and the government’s next move is to raid the personal accounts of ordinary Greeks – the situation there will become much more volatile.