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Greek banks prepare for “bail-in”

In the financial news, nothing is getting more attention than Greece’s financial plight. In short, Greece cannot meet its debt payments schedule without further assistance from the European Central Bank and the International Monetary Fund, both of which want a more strident austerity program than the present one that has already brought the people of Greece to their knees. Without ECB and IMF relief, Greece will default.

“The Powers That Be” at the ECB and the IMF gave Greece a “take it or leave it” offer, which the people of Greece will vote on in a referendum tomorrow, Sunday, July 5. Supposedly, the issue is too close to call, but I wonder about that.

With a “Yes” vote, Greeks would be imposing more austerity on themselves. A “No” vote would result in them walking away from massive debt and a return to the drachma as their currency with at least a hope of things getting better.

Now comes news that Greek banks have already made plans for a “bail-in” that would take place if a “Yes” vote prevails. The Financial Times reports that the tentative plan calls for a 30 percent confiscation of deposits more than €8,000. Few deposits over €100,000 remain in Greek banks, so smaller depositors would bear the brunt of any bail-in. A similar scheme was forced on Cyprus in 2013 as a condition for receiving more funds from the ECB and the IMF.

Often articles and blog posts appear on the Internet about a bail-in coming to the United States because of its massive debt and continued deficit spending. I do not think a bail-in is on the horizon for the US because we can print additional dollars to pay our debts. The Greeks cannot, since they joined the eurozone, where the creation of euros is controlled by the ECB. However, a return to the drachma would give Greece the option to print in servicing its debt, as does the US.

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