Crisis explodes in Europe with bank run.
Rumors of a "corralito," restricting withdrawals to just 50 euros per account holder, are driving thousands to bank branches; banks could collapse, and after Greece, Spain is being pointed to as the next target.
247 Europe woke up today to rumors that the Greek government has imposed a fifty-euro limit on bank withdrawals. The attempt to retain funds within the "corralito," as the unpopular semi-freeze of bank deposits is called, is a desperate measure by the government to prevent the collapse of the country's financial system.
Fearing that the country might leave the eurozone, Greeks rushed to bank branches to withdraw as much as possible from their accounts to avoid currency devaluation. According to Greek President Karolos Papoulias, withdrawals have reached 700 million euros since the elections on May 6th. However, the British newspaper "Financial Times," citing sources in the Greek banking sector, claims that 1,2 billion euros were withdrawn on Monday and Tuesday alone.
The strategy of freezing deposits was used in Argentina in December 2001 by the then Minister of Economy, Domingo Cavallo, and the president, Fernando de la Rúa. Days later, the world witnessed the country's collapse, a moratorium on its debts, and a political crisis marked by the resignation of the head of state.
A potential panic in the Greek financial system and the country's exit from the eurozone would have implications throughout Europe, as well as impacting other markets worldwide. Athens has loans to repay to all countries in the European Union and to members of the IMF. France alone owes approximately €50 billion. Spain, in recession, is being pointed to as the next target.