Greece to face “Cyprus-style solution” in a month

Greece may face the Cyprus bank crisis in the nearest future.

The crash of Cyprus financial sector and government bailout in 2013 prevented its banks customers from withdrawing their money. The main banks were closed due to insolvency.

Greece is supposed to struggle the same fate.

The Greek government has not received any money from the EU or the IMF since August 2014. That means that Greek government accounts are just about bone dry. The new Greek government continues to insist that it will never "violate its anti-austerity mandate", while the screws are tightening. The unemployment rate in Greece is over 25 percent and the banking system is on the verge of collapse.

The EU is reported to confiscate money from private bank accounts just like they did in Cyprus.

Greece came this close to defaulting on a loan payment to the IMF back on May 12th. Athens barely made its latest payment (May 12) to the IMF, and it managed to do so only when the government discovered that it could use a reserve account it wasn't aware of, according to the Greek media.

Prime Minister Alexis Tsipras wrote to the IMF's Christine Lagarde warning that Greece would not be able to make that May payment, worth €762 million.

Pension and civil-servant pay packets are due at the end of the month, and Athens may struggle to pay them. Even if it does manage, on June 5 the country owes another €305 million to the IMF.

In the two weeks following June 5 there are another three payments, bringing the June total to the IMF to over €1.5 billion.

Meanwhile, Greek banks also find themselves in very hot water. Many of them are almost totally out of collateral, and without outside intervention some of them could start collapsing within weeks.

"The point where collateral is exhausted is likely to be near," JPMorgan Chase Bank analysts Malcolm Barr and David Mackie wrote in a note to clients May 15. "Pressures on central government cash flow, pressures on the banking system, and the political timetable are all converging on late May-early June."

Some eurozone finance ministers tend to impose a "Cyprus-style solution".

Also read: Crisis in Cyprus shows collapse of the West