Tag Archives: Capital control

The Greek Bank Holiday and Capital Controls

Saturday, 27 June 2015 and earlier:

  • In a Medium blog post, Karl Whelan provides an excellent discussion of the policy mistakes that worsened the Greek debt crisis.
  • Hans-Werner Sinn’s “The Greek Tragedy.”
  • Alex Barker discusses in the FT the options for Greece’s banking system.

Sunday, 28 June:

  • Christian Rickens comments in Der Spiegel that the upcoming Greek referendum is the price to pay for five years of cowardice, both on the part of the Greek government and its European partners.
  • The FT summarizes the main policy decisions during the last days that led the Greek economy to “hit a roadblock.”
  • The Economist writes that “[I]n these circumstances a cap on ELA must mean tough restrictions on deposit withdrawals both in cash and through transfers abroad.” It draws parallels to Cyprus in March 2013 where banks closed for two weeks and where capital controls were recently lifted.
  • Ekathimerini reports about the decision to close the banks and instate capital controls. It quotes the Greek prime minister as saying that “[Rejection] of the Greek government’s request for a short extension of the program was an unprecedented act by European standards, questioning the right of a sovereign people to decide. … This decision led the ECB today to limit the liquidity available to Greek banks and forced the Greek central bank to suggest a bank holiday and restrictions on bank withdrawals. … One thing is clear: the refusal of a short extension, and the attempt to nullify a democratic procedure is an act deeply offensive and shameful for the democratic traditions of Europe.”

Monday–Tuesday, 29–30 June:

  • Claire Phipps summarizes in The Guardian the main elements of the ‘Bank Holiday break’ decree that the Greek prime minister and president enacted during the night, in response to “the extremely urgent and unforeseen need to protect the Greek financial system and the Greek economy due to the lack of liquidity caused by the Eurogroup’s decision on June 27 to refuse the extension of the loan agreement with Greece”.
  • Philip Stafford and Roger Blitz speculate in the FT about the implications of Grexit. (See also the earlier post on Lex Monetae.)
  • The FT’s liveblog.
  • In the FT, Martin Sandbu convincingly addresses questions on the bigger picture, including political aspects of the crisis.
  • Anil Kashyap has published “A Primer on the Greek Crisis.”
  • In the FT, Shawn Donnan discusses the consequences of a Greek default against the IMF.
  • Der Spiegel reviews how the international press assigns responsibility for the crisis.

Wednesday, 1 July:

  • In the FT, Peter Spiegel outlines the way forward to a new “Greek” bailout.
  • The Economist’s Free Exchange blogger on the limited experience with capital controls (Iceland, Cyprus, now Greece).

Note: This post has been updated repeatedly.

Macroeconomic Policy

In a Vox column, Olivier Blanchard distills ten takeaways from an IMF conference on “Rethinking Macro Policy. Progress or Confusion?’” He lists them under the following headings:

  1. What will be the ‘new normal’?
  2. What the new normal will be matters a lot for policy design
  3. Can we hope to limit systemic financial risk?
  4. Should monetary policy go back to its old ways?
  5. Instrument rules
  6. Macroprudential tools or financial regulation
  7. Should central banks keep their independence?
  8. Little progress on the design of fiscal policy
  9. The complex effects of capital flows
  10. How much can the international monetary system be improved?

Olivier Blanchard To Leave IMF

Chris Gilles reports in the FT about Olivier Blanchard’s plans to retire as IMF chief economist. Olivier emphasized the importance of academic research and challenged the Washington consensus. Under his watch, the IMF

  • questioned the benefits of unrestricted capital flows;
  • suggested higher inflation targets;
  • emphasized costs of “austerity.”

As the article points out not all of these initiatives were successful.