Bank of America Strategist: Humanitarian Disaster Is Looming in Greece
His view: Greek banks will soon exhaust cash supplies, leading to shortages of imports including medicine unless the European Central Bank expands assistance, he said in an interview. A July 5 referendum on austerity measures probably will usher in August elections and a potential new government.
Then “the earliest Greece will get any new funding is September or later – in the meantime, the economy will collapse,” Vamvakidis said. “On a personal level, this is a very bad situation. And the worst is still ahead of us.”
To prevent a crisis, the ECB will have to boost the Emergency Liquidity Assistance program long beforehand, continuing to ensure Greek lenders have enough cash on hand, the strategist said.
“Otherwise, you’ll have a humanitarian disaster,” he said. “People will start to be affected when they can’t withdraw their paychecks, when you start to see shortages because Greece imports many of its products. For instance medications are imported, some food items are imported.”
Greece imposed emergency capital controls for its financial system early Monday, closing banks and financial markets after the announcement of the referendum fueled concern the country will exit the euro. Over the weekend, citizens lined up at ATMs to withdraw savings. They are now limited to 60 euros ($66) in daily withdrawals.
Before joining Bank of America in 2010, Vamvakidis spent 13 years at the International Monetary Fund, where he held a number of senior positions. He earned a bachelor’s degree from the University of Macedonia in Thessaloniki, Greece, and a master’s and doctorate in economics from Harvard University.
The referendum probably will result in a “yes” vote to proposed reforms as most Greeks want to remain part of the euro, Vamvakidis said. A “no” vote could result in bank failures as the ECB closes its emergency liquidity facility, he said.
Without more ECB help, “banks will run out of money soon,” he said. “Within the limits, we will need more euro notes in Greece.”
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