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Greece: Lack of liquidity could lead to a “humanitarian crisis”

If remained unanswered the immediate necessity of liquidity might develop into a “humanitarian crisis”, argues leading European banking and law analyst Dr Giuliano Castellano of the University of Warwick.

Dr Castellano also argues that “While the Greek Government intends the ‘no’ vote as to strengthen its bargaining power and reduce the austerity measures asked by the international creditors; the results of the referendum cast a shadow on the possibility for the Eurozone leaders to extend a guarantee over a new ECB emergency loan”


  • Dr Castellano’s full comment can be read below.


The results of the Greek referendum open to new, uncharted scenarios on many fronts.

The negotiations between the Greek Government and the international creditors are occurring while the shortage of liquidity is crippling the Greek banking system and therefore Greek society. Insofar, the European Central Bank (ECB) and the Bank of Greece have answered to this emergency with two main strategies. The ECB provided emergency liquidity and purchased the Eurozone’s governments debts (through the quantitative easing programme).

The Bank of Greece issued capital controls (halting the Greek banking system in order to avoid capitals to flee the country) and imposed a daily cash withdrawal limit to €60, probably to be further reduced within the next hours. The ECB, within the next hours, may decide to further supply emergency funds. However, this would require a guarantee of the Eurozone’s leaders over such new emergency loan.

While the Greek Government intends the ‘no’ vote as to strengthen its bargaining power and reduce the austerity measures asked by the international creditors; the results of the referendum cast a shadow on the possibility for the Eurozone leaders to extend a guarantee over a new ECB emergency loan. In fact, if no agreement were to be reached soon, an emergency loan would imply some sort of ‘blank guarantee’, as no plan for restructuring the debt is on the table.

On the horizon there is also the possibility of a levy on Greeks deposits, as occurred in Cyprus in 2013. Nonetheless, this painful solution appears to be a rather long-term plan, compared to the immediate necessity of liquidity that if unanswered might develop into a humanitarian crisis. “

- For More information please contact;

Tom Frew, International Press Officer:

a.t.frew@warwick.ac.uk

Dr Giuliano Castellano:

G.G.F.Castellano@warwick.ac.uk