Syriza defiant despite Greek bank troubles

Greek finance minister Yanis Varoufakis has said debt restructuring is the only solution
The International Monetary Fund bears “criminal responsibility” for the damage caused to Greece’s economy since its first bailout, the country’s Prime Minister, Alexis Tsipras, said during a powerful speech yesterday.

Meanwhile Greek Finance Minister Yanis Varoufakis has said a “Grexit” would not be a sensible solution and called for debt restructuring.

Tsipras told his MPs the austerity proposals put forward by Greece’s lenders were “humiliating for our people”.

He added that the mandate given to his party, Syriza, by the Greeks, was “not a mandate of creative ambiguity: it is a clear mandate to stop austerity”.

The speech comes after days of increasingly fraught negotiations between Greece and its lenders failed to end in a deal which will unlock a €7bn (£5bn) tranche of bailout money.

The risk of a default is causing a slow motion bank run, with deposits being withdrawn from Greek banks. The banking system lost €4.9bn in April, according to the Bank of Greece.

“We believe that banks experienced significant deposit outflows in May as well,” said Nondas Nicolaides, a senior credit officer at Moody’s.

Greek banks meet withdrawals by borrowing emergency funds from Europe, and have borrowed €83bn, but it is not clear whether this will be continued if Greece cannot agree a deal by the end of June.

It is feared there could be capital controls if no solution is found.

“Such capital controls could be in the form of restrictions on deposit withdrawals, such as imposing a daily limit on how much cash depositors can withdraw and on money transfers abroad,” Nicolaides said.

“Although capital controls would help limit banks’ deteriorating liquidity, they would hurt an economy already in recession by placing administrative burdens on economic activity. For firms and households, capital controls would increase uncertainty about their uninterrupted access to their deposits.”

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