The timelime leading up to the Cypriot bank holiday looks like this. What could happen next in Greece?
June 25, 2012: Cyprus formally requests a bailout from the EU.
· November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).
· February 25, 2013: Democratic Rally candidate Nicos Anastasiades wins Cypriot election defeating his opponent, an anti-austerity Communist.
· March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000… a bank holiday is announced.
· March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.
· March 18 2013: Bank holiday extended until March 21 2013.
· March 19 2013: Cyprus parliament rejects bail-in bill.
· March 20 2013: Bank holiday extended until March 26 2013.
· March 24 2013: Cash limits of €100 in withdrawals begin for largest banks in Cyprus.
· March 25 2013: Bail-in deal agreed upon. Those depositors with over €100,000 either lose 40% of their money (Bank of Cyprus) or lose 60% (Laiki).
What does this have in common with Greece?
The straw that broke the camels back in Cyprus was a “renegade” parliament postponing a decision on a bail in.
In Greece we now have an apparent “renegade” government delaying negotiations with the EU.
In Cyprus the delay in a decision was enough to extend a bank holiday
The Cyprus government refused to play ball, even under the shadow of a bank holiday and rejected the EU proposals.
Draconian currency controls enacted by banks.
Cypriot government caves in to demands.
Assuming Greece follows the same template, what is next?
A bank holiday of a week.
If that is not enough to bring the government to heal banks will reopen but with draconian capital controls.
Ball will then be firmly in the Tsipras’ court.
Draconian capitals controls will massively ramp up the political pressure/blackmail meaning the Greek population will fold like a handkerchief and will accept whatever conditions are put forward.
Without it’s own currency, Greece has no choice but to comply with whatever demands are presented.
And this is why the hope of Greece leaving the Euro is utter nonsense. It is an optimist’s fantasy.
Without the Drachma, the Greek government has zero leverage in these negotiations and never has done.
For anyone to suggest otherwise shows a complete lack of understanding of the situation
There is only way that the Greek government could have any leverage and that is if they have printed the new Drachma already and they are ready to nationalise the Greek banks if they do not co-operate.
Personally, I believe Tsipras and Varoufakis do not have the balls to do this, not even remotely.
And one thing to remember about Cypriot bank holiday.