Welcome to the 1930s: possible capital control after Grexit12 June, 2012, 0:49. Posted by Zarathustra
Tags: Euro Crisis
We wrote rather briefly about the failure of Credit Anstalt in 1931 and how it triggered effectively a Europe-wide banking crisis, with bank run, then bank holiday, capital control, and many other things.
Now that was 1930s, surely that can’t happen now?
If Greece exits the euro zone, redenomination of euro in Greece will likely trigger capital control. Next, bank runs in other parts of the currency union, particularly those perceived to be week is not inconceivable. Then, one has to stop people from moving money around. So here we go, the European Union is considering capital control, limiting cash withdrawal, border control, and suspension of Schengen agreement. Via Reuters:
European finance officials have discussed as a worst-case scenario limiting the size of withdrawals from ATM machines, imposing border checks and introducing capital controls in at least Greece should Athens decide to leave the euro.
As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.
Se welcome to the 1930s.