by John Galt
June 12, 2012 17:50 ET
The reports of capital controls being implemented should Greece leave the Eurozone have been flying throughout the internet over the last twenty-four hours, leaving many to wonder if the European Union is about to descend into the status of a large latte sipping banana republic. Switzerland’s central bank (SCB) is already rumored to have a plan in place to freeze all incoming funds at their borders and penalize anyone attempting to convert deteriorating Euros into Swiss Francs along with currency exchange controls (See ZeroHedge, Bruce Krasting’s May 28th article – Capital Controls Coming to Greece and Switzerland). The problem with this approach is the large underground economy which it creates and unfortunately for the nation of Greece, that has already begun.
The concerns of the ongoing bank run by depositors in Greek banks have created the basis for a second leg of the domestic financial crisis which will collapse the system if the elections result in a conflict with the Troika and ECB regarding aid to the Greek financial system and potential default. On Bloomberg this morning the pace of withdrawals has accelerated as the article at the link below indicates:
Greek Bank Deposit Outflows Said to Have Risen Before Elections
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