Justin Spitter Greece has fallen from the headlines… but everyday life there is still a nightmare.
Regular readers know we’ve been closely following the financial disaster in Greece. For years, Greece spent more than it took in in taxes. This led to a financial crisis that looked like it might destroy Europe’s financial system.
The Greek government closed all banks in June to prevent people from withdrawing all their money and crashing the banking system. And it let Greek citizens withdraw only €60 ($67) of their own money each day from ATMs.
The country’s debt crisis ended (for now) earlier this month, when European authorities agreed to bail out Greece. This news calmed investors, but Reuters reports that things on the ground in Greece are still bad:
Greek banks are set to keep broad cash controls in place for months, until fresh money arrives from Europe and with it a sweeping restructuring, officials believe.
“Broad cash controls” means Greek banks are essentially frozen. Greek people can withdraw only €420 ($455) per week of their own money… and it looks like it will stay that way for months.
More from Reuters:
The longer it takes, the more critical the banks’ condition becomes as a 420 euro ($460) weekly limit on cash withdrawals chokes the economy and borrowers’ ability to repay loans.
“The banks are in deep freeze but the economy is getting weaker,” said one official, pointing to a steady rise in loans that are not being repaid.
One Greek farmer can’t get enough cash to run his business, Reuters says:
“It’s a nightmare. I owe many people money now – gas stations and firms that service machinery. I have to go to the bank every single day, and the money I can take out is not enough.”
Short on cash, Greek people have resorted to bartering…
Here’s Reuters:
A rising number of Greeks in rural areas are swapping goods and services in cashless transactions since the government shut down banks on June 28 for three weeks, restricted cash withdrawals and banned transfers abroad to halt a run on deposits and prevent a collapse of the banks.
“Bartering” means exchanging goods and services without using money. It’s how humans did business thousands of years ago. Bartering is extremely inefficient because you have to find someone who has what you want… and wants what you have.
Reuters reports how the Greek farmer is trying to survive the crisis:
Squeezed on all sides, the 41-year-old farmer began informal bartering to get around the cash crunch. He now pays some of his workers in kind with his clover crop and exchanges equipment with other farmers instead of buying or renting machinery.
Another farmer is trading cotton and wheat for bales of hay and machine parts, Reuters says.
This is a good reminder of something we stress often: the government controls any money you have in the bank. It can decide you’re not allowed to touch your own money at any time. Or it can put severe restrictions on how much money you can take out, like the Greek government is doing right now. And there’s nothing you can do about it.
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