Stournaras comments on capital controls and Varoufakis

12 October 2016
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A large part of the money that was taken out of the banks between December 2014, when early elections were called after a President could not be elected, and the announcement for the referendum in June 2015, is stashed under ‘mattresses’, argued the Governor of the Bank of Greece Yannis Stournaras on Tuesday.

Asked by SYRIZA MPs why the Bank of Greece did not activate any tools to prevent the outflow of bank deposits in the first half of 2015 and why the European Central Bank did not provide Greece with unlimited funding to prevent the capital controls, the central bank responded that due to the freedom of movement of capital, the Bank of Greece cannot intervene and may only monitor.

As he told the parliamentary committee, bank deposits depend on trust, which in turn depends to a greater extent to the government’s fiscal policy. At the time, depositors were insecure due to the delays in the government completing negotiations with the country’s creditors, he added.

Furthermore, the central bankers stressed that the decision to introduce capital controls came after the Finance Minister at the time, Yanis Varoufakis, told the head of the ECB that Greece is a bankrupt country. Mr. Stournaras claims that he urged the ECB to ‘not take Varoufakis into account’, however that is not possible since he was Minister of Finance. Mr. Stournaras added that the former Minister convinced the ECB that with him in charge ‘there was no return’. The governor noted that the urged that government in writing to ‘reign him in’. The former Finance Minister has responded to the allegation, noting that a response will come in the Saturday edition of the Efimerida ton Syntakton and stated that “those who pretend to have prevented the bankruptcy can carry on expanding it, until then”.

Commenting on the decision to shut down the banks in the summer of 2016, Mr. Stournaras noted that after the referendum was announced, people withdrew 900 million euros up to Sunday evening. In such an environment, he explained, the ECB was unable to carrying on providing liquidity and that if the banks were to open, the system would crash due to the high demand for cash.

Mr. Stournaras also stated that he was not aware of bank executives urging their customers to send their money abroad. As she explained though, the largest portion of funds taken out of Greek banks in the second half of 2016 was withdrawn via ATMs, rather than transferring funds to overseas banks. The Governor underlined that if the government did not complete the negotiations at the time, the country would not be covered by the bailout program, which is a condition to receive liquidity from the ECB. Greek banks did not have the necessary guarantees to receive further funding.

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