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Greek Banks Drop After Eurogroup Meeting

piraeus-bankGreek banks dropped in Athens Stock Exchange (ASE) after the meeting between the Eurozone’s Finance Ministers ended abruptly when Greece refused to sign a bailout program extension. According to Bloomberg, this raised concern among creditors who “may need to introduce controls to avert capital outflow.”
A few minutes before 11:00 am on Tuesday, the FTSE/Athex Banks Index dropped by 9.6%, followed by Piraeus Bank SA with a drop of 9.3% and the National Bank of Greece (NBG) that dropped 6.7%.
At the moment, Greek banks are relying on funds provided by the European Central Bank (ECB). However, according to economists at Barclays Plc including Antonio Garcia Pascual and Thomas Harjes, the Emergency Liquidity Assistance (ELA) will not be provided to Greece if the country does not reach an agreement with its European loan partners.
The Eurogroup meeting did not result in any sort of compromise or agreement, therefore creditors are concerned that ECB will stop providing liquidity to Greek banks. In this case, capital controls will need to be set up in order to avoid “funds fleeing Greece,” while Greek banks will need to implement new rules in order to regulate cash withdrawals, noted the economists.

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