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European Union

EU breakup imminent: Talk of limiting ATM withdrawals, halting flow of money across borders

Thursday, June 14, 2012 by: J. D. Heyes
Tags: European Union, bank runs, financial collapse

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(NaturalNews) It may not be long before it's back to the future for Europe. Once, the continent was a collection of independent nations, not tied by language, culture or religion, even. About the only thing European nations shared was geography; they all belonged to the same continent.

That all changed in the years immediately following World War II. Founding on a number of treaties and having gone from six members initially to the current 27, the European Union (EU) promised to become on that continent what the United States had become on the North American continent.

From the European Declaration, made by the foreign ministers of Germany, France, Italy, the Netherlands, Belgium, and Luxembourg at the signing of the Treaty of Paris on April 8, 1951, which formed the nexus of the European Coal and Steel Community; to the Treaties of Rome establishing the European Economic Community (EEC) and the European Atomic Energy Community through the 1960s, 70s and 80s eventually leading to the formation of the EU in 1993; to the adoption of a single currency, the euro, in 1999 - the continent appeared headed for the kind of confederation envisioned by European unifiers decades ago.

Now, as several EU countries teeter on the brink of fiscal insolvency, the stitching that held the union together appears to be unraveling, and no matter how much money believers in the dream throw at the problem, a genuine, lasting solution seems elusive at best.

Cuts forced many Greeks into 'abject poverty'

Among the measures currently under consideration is placing a limitation on the amount of money Europeans can withdraw from automatic teller machines (ATMs), as a way to prevent rushes on, and collapses of, European banks which are already scrambling to remain viable.

Perhaps the nation most likely to abandon the euro first is Greece, with its citizens set to vote Sunday on new leaders who seem bent on bailing out of the euro and returning the country to the old drachma currency. This week, ahead of the vote, Greeks are withdrawing about 800 million euros ($1 billion) a day out of major banks, while using at least some of their money at local grocery and retail stores to stock up on supplies in fear of a total collapse.

At issue is whether Greeks want to accept tough austerity measures imposed upon it by the International Monetary Fund and EU as part of a bailout deal to rescue the economically failing country. Euro-zone analysts have said many Greeks want to have things both ways - they want the IMF and EU to pour hundreds of billions in cash into the country but they don't want to accept measures aimed at fixing the country's economic problems. Some of those measures have included salary and pension cuts which have forced many Greeks into "abject poverty," Reuters reported.

European Commission (EC) officials are developing worst-case scenarios should Greece decide to dump the euro; besides limiting ATM withdrawals, officials are considering imposing "border checks and introducing euro zone capital controls," the Irish Times reported.

Buying food won't stave off the crisis

The commission is also considering suspension of the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.

"Contingency planning is underway for a scenario under which Greece leaves," said one unnamed EC source to the Irish Times. "Limited cash withdrawals from ATMs and limited movement of capital have been considered and analyzed."

"These are not political discussions, these are discussions among finance experts who need to be prepared for any eventuality," said a second source. "It is sensible planning, that is all, planning for the worst-case scenario."

"People are terrified by the prospect of returning to the drachma and some believe it's good to fill their cupboard with food products," said Vassilis Korkidis, head of the ESEE retail federation. "It's over the top, we must not panic. Filling the cupboard with food doesn't mean we will escape the crisis."

Greece is in its fifth year of recession. Other countries at risk of a financial collapse include Ireland, Spain, and Portugal.

Sources for this article include:

http://www.irishtimes.com/newspaper/breaking/2012/0612/breaking24.html

http://www.cnbc.com/id/47793980

http://www.independent.ie
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