Greece's central bank warns of 'uncontrollable crisis' if parties fail to reach a bail-out agreement

Around €30bn of capital has left Greek bank accounts since October

Hazel Sheffield@hazelsheffield
Wednesday 17 June 2015 19:29
Alexis Tsipras and Jean-Claude Juncker, the head of the European Commission
Alexis Tsipras and Jean-Claude Juncker, the head of the European Commission

A report from the Bank of Greece has begged both the Greek government and its creditors to reach agreement before the country is doomed to 'uncontrollable crisis'.

In a monetary policy report, Greece's central bank warned that failure of the Greek government to reach a bail-out deal would bankrupt the state and lead to its exit from the EU. Around €30bn of capital has left Greek bank accounts since October, mostly in the form of cash withdrawals and hoarding, though some capital flight has been recorded, the bank said.

The report published on Wednesday set out the potential consequences of failed negotiations:

  • Exit from the euro

  • Soaring inflation resulting from an exchange rate crisis

  • 'Deep recession', hitting household income, pushing up unemployment 'exponentially'

"What we need today is a viable debt deal which will spare future generations burdens that we have no right to saddle them with," the report said.

The report also stated that a compromise has been reached on the main conditions and that "little ground remains to be covered".

"In order to achieve that, we have to seek a deal which will spread the burden evenly and which will not hurt wage earners and pensioners," he said.

This is despite the rhetoric from both sides becoming more entrenched. Tsipras denounced Brussels, the International Monetary Fund and the European Central Bank on Tuesday, accusing them of trying to 'humiliate' Greece. The IMF was ‘criminally responsible’ for the country’s economic woes, he said.

After that meeting the Jean-Claude Juncker, the EC president, said that Tsipras was misleading the Greek people about the proposed reforms, such as a 10 per cent hike in VAT in electricity. "The debate in Greece and outside Greece would be easier if the Greek government would tell exactly what the Commission . . . are really proposing," Juncker said.

Greece is in negotiations to secure further loan money to reach a €1.6 billion loan repayment to the IMF by the end of June.

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