This is what it looks like when a country goes bankrupt.
The Greek government, which Tuesday missed a payment to the International Monetary Fund, is scrambling to come up with the money to pay pensions and other bills. And Greece's banks, closed since Monday, have all but exhausted an emergency credit line provided by the European Central Bank.
Greece is effectively out of money, analysts said Wednesday. And there appears to be little prospect of resuming bailout negotiations with the IMF, the European Central Bank and the other eurozone nations until at least after a referendum vote on a bailout offer set for Sunday. The European Central Bank has shown no sign of advancing additional money while Greece's financial future is clouded by so much uncertainty.
Without a lifeline, analysts say, Athens may be forced within a month to resort to issuing IOUs, scrips or an ersatz currency to pay its pensioners and other domestic obligations.
"Greece is de facto insolvent now," said Mujtaba Rahman, the chief eurozone and Greece analyst at Eurasia Group, a political risk analysis firm based in New York. "They have not paid the IMF, they are barely paying domestic pensions, and there is no framework to suggest Greece will have recourse to external financing quickly."
Oxygen is being gradually cut off to the Greek economy by the capital controls that have been imposed on the banks. To conserve funds, ATM withdrawals have been limited to 60 euros a day, among other measures.
While there is little hard data on how much financial leeway the banks have left, by some estimates they have less than 2 billion euros, or about $2.2 billion, in unused central bank credit. That would be enough money to last perhaps until early next week.
Greek banks are supposed to be closed until next Tuesday following the European Central Bank's decision Sunday to cap an emergency credit line at 89 billion euros. At a meeting Wednesday, the central bank left the cap at that level, a spokesman said.
But even if the central bank were to lift that cap - which is unlikely unless Greece reaches an agreement with its creditors - the Greek banks probably have less than 30 billion euros worth of collateral available to use against further loans, according to an estimate by Barclays.
That sum could be exhausted swiftly if depositors continue to withdraw their money. And there is a chance that the European Central Bank could tighten collateral requirements after Greece missed its 1.5 billion euros IMF payment Tuesday. Such a decision would only further constrain Greek banks' access to emergency cash, perhaps causing some to fail.
What all this means is that any new bailout that Greece might discuss with its creditors would now have to be based on new, even worse economic growth forecasts than before. Unless international creditors have a change of heart and decide to grant Greece's request for relief from some of its staggering debt, the terms of any new bailout would probably require even tougher austerity measures than the ones that Prime Minister Alexis Tsipras has been trying to avoid.
"They may have backed themselves into a corner of more austerity because the economy has gotten weaker," said Zsolt Darvas, a senior fellow at Bruegel, a policy research group in Brussels.
"Now the government realizes that if they want to stay in the euro, they need a new program, and the terms will depend on whether the countries want to teach Greece a hard lesson and demand harder conditions, or say, 'OK, let's go easier and try to save the country.'"
The Greek state does not provide overall figures for how much money it has, so economists, as well as Greece's creditors, are left with best-guess estimates. Greece made its last two international payments by tapping its reserves at the IMF and calling in funds from other government departments within the country.
"Functionally, they are out of money now and living on borrowed money," said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, New York.
Although at the end of May Greece reported a small primary surplus of 1.5 billion euros - the amount of cash on hand minus expenses and interest payments on the debt - analysts said that in reality the money had probably already been consumed by international and domestic payments that Greece was scrambling to make.
And some of that primary surplus accumulated only because Athens had not been paying arrears owed to the nation's hospitals, state institutions and private companies with state contracts.
Tax receipts, which had started to rise at the end of last year, very likely plunged in the past couple of months as people and businesses refrained from making payments over concern that Greece might exit the euro. Greece had a shortfall in tax revenues of more than 1.7 billion euros at the end of May.
Corporate and income tax receipts have no doubt declined further since then, as have value-added tax payments, said Wolfango Piccoli, a managing director of Teneo Intelligence in London.
"Why would you pay now," he said, "when one month down the line the country could be in default or God knows where?"
The Greek central bank itself is facing a sizable shortfall: Not only did Tsipras' government not make its loan payment to the IMF on Tuesday, it also failed to make a 472 million euros payment to the central bank for a loan it extended to the Greek government back in 1994.
"It tells you just how precarious the situation is," said Jens Bastian, an economics consultant based in Athens and a former member of the European Commission's task force on Greece. "You weren't even able to pay your own central bank."
Bastian estimated the state had enough cash to pay state salaries and pensions for at least this month. But unless Greece and its creditors can strike a deal for a new bailout, Greece risks defaulting on the European Central Bank on July 20 when a 3.5 billion euros repayment is due.
The European Central Bank might be forced to take severe measures if the Greeks vote "no" on the referendum on whether to accept the most recent conditions set by creditors in return for more financial aid. And if Greece cannot make that July 20 payment, the governing council of the central bank might see little choice but to cut off aid altogether.
According to its own rules, the European Central Bank may lend only to banks that are solvent. And the Greek banks will be insolvent if the government cannot pay its bills. The banks own large quantities of government bonds, and they face huge losses now that the value of those bonds is seriously in doubt. If the banks fail, the European Central Bank would lose some or all of the 89 billion euros it has provided in emergency cash.
The restrictions on bank transactions that the government imposed this week do not prevent electronic money transfers within Greece, which means that companies can still pay salaries and Greeks can still use debit cards to make purchases.
But the Greek economy still runs largely on cash, and many people do not have debit cards or credit cards. Those people, disproportionately poor and elderly, could have trouble making everyday purchases. And their plight would become even worse if banks ran out of euro notes altogether, which could happen within days.
"We are probably almost there," said Antonio Garcia Pascual, an analyst with Barclays in London.
The Greek government, which Tuesday missed a payment to the International Monetary Fund, is scrambling to come up with the money to pay pensions and other bills. And Greece's banks, closed since Monday, have all but exhausted an emergency credit line provided by the European Central Bank.
Greece is effectively out of money, analysts said Wednesday. And there appears to be little prospect of resuming bailout negotiations with the IMF, the European Central Bank and the other eurozone nations until at least after a referendum vote on a bailout offer set for Sunday. The European Central Bank has shown no sign of advancing additional money while Greece's financial future is clouded by so much uncertainty.
Without a lifeline, analysts say, Athens may be forced within a month to resort to issuing IOUs, scrips or an ersatz currency to pay its pensioners and other domestic obligations.
"Greece is de facto insolvent now," said Mujtaba Rahman, the chief eurozone and Greece analyst at Eurasia Group, a political risk analysis firm based in New York. "They have not paid the IMF, they are barely paying domestic pensions, and there is no framework to suggest Greece will have recourse to external financing quickly."
Oxygen is being gradually cut off to the Greek economy by the capital controls that have been imposed on the banks. To conserve funds, ATM withdrawals have been limited to 60 euros a day, among other measures.
While there is little hard data on how much financial leeway the banks have left, by some estimates they have less than 2 billion euros, or about $2.2 billion, in unused central bank credit. That would be enough money to last perhaps until early next week.
Greek banks are supposed to be closed until next Tuesday following the European Central Bank's decision Sunday to cap an emergency credit line at 89 billion euros. At a meeting Wednesday, the central bank left the cap at that level, a spokesman said.
But even if the central bank were to lift that cap - which is unlikely unless Greece reaches an agreement with its creditors - the Greek banks probably have less than 30 billion euros worth of collateral available to use against further loans, according to an estimate by Barclays.
That sum could be exhausted swiftly if depositors continue to withdraw their money. And there is a chance that the European Central Bank could tighten collateral requirements after Greece missed its 1.5 billion euros IMF payment Tuesday. Such a decision would only further constrain Greek banks' access to emergency cash, perhaps causing some to fail.
What all this means is that any new bailout that Greece might discuss with its creditors would now have to be based on new, even worse economic growth forecasts than before. Unless international creditors have a change of heart and decide to grant Greece's request for relief from some of its staggering debt, the terms of any new bailout would probably require even tougher austerity measures than the ones that Prime Minister Alexis Tsipras has been trying to avoid.
"They may have backed themselves into a corner of more austerity because the economy has gotten weaker," said Zsolt Darvas, a senior fellow at Bruegel, a policy research group in Brussels.
"Now the government realizes that if they want to stay in the euro, they need a new program, and the terms will depend on whether the countries want to teach Greece a hard lesson and demand harder conditions, or say, 'OK, let's go easier and try to save the country.'"
The Greek state does not provide overall figures for how much money it has, so economists, as well as Greece's creditors, are left with best-guess estimates. Greece made its last two international payments by tapping its reserves at the IMF and calling in funds from other government departments within the country.
"Functionally, they are out of money now and living on borrowed money," said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, New York.
Although at the end of May Greece reported a small primary surplus of 1.5 billion euros - the amount of cash on hand minus expenses and interest payments on the debt - analysts said that in reality the money had probably already been consumed by international and domestic payments that Greece was scrambling to make.
And some of that primary surplus accumulated only because Athens had not been paying arrears owed to the nation's hospitals, state institutions and private companies with state contracts.
Tax receipts, which had started to rise at the end of last year, very likely plunged in the past couple of months as people and businesses refrained from making payments over concern that Greece might exit the euro. Greece had a shortfall in tax revenues of more than 1.7 billion euros at the end of May.
Corporate and income tax receipts have no doubt declined further since then, as have value-added tax payments, said Wolfango Piccoli, a managing director of Teneo Intelligence in London.
"Why would you pay now," he said, "when one month down the line the country could be in default or God knows where?"
The Greek central bank itself is facing a sizable shortfall: Not only did Tsipras' government not make its loan payment to the IMF on Tuesday, it also failed to make a 472 million euros payment to the central bank for a loan it extended to the Greek government back in 1994.
"It tells you just how precarious the situation is," said Jens Bastian, an economics consultant based in Athens and a former member of the European Commission's task force on Greece. "You weren't even able to pay your own central bank."
Bastian estimated the state had enough cash to pay state salaries and pensions for at least this month. But unless Greece and its creditors can strike a deal for a new bailout, Greece risks defaulting on the European Central Bank on July 20 when a 3.5 billion euros repayment is due.
The European Central Bank might be forced to take severe measures if the Greeks vote "no" on the referendum on whether to accept the most recent conditions set by creditors in return for more financial aid. And if Greece cannot make that July 20 payment, the governing council of the central bank might see little choice but to cut off aid altogether.
According to its own rules, the European Central Bank may lend only to banks that are solvent. And the Greek banks will be insolvent if the government cannot pay its bills. The banks own large quantities of government bonds, and they face huge losses now that the value of those bonds is seriously in doubt. If the banks fail, the European Central Bank would lose some or all of the 89 billion euros it has provided in emergency cash.
The restrictions on bank transactions that the government imposed this week do not prevent electronic money transfers within Greece, which means that companies can still pay salaries and Greeks can still use debit cards to make purchases.
But the Greek economy still runs largely on cash, and many people do not have debit cards or credit cards. Those people, disproportionately poor and elderly, could have trouble making everyday purchases. And their plight would become even worse if banks ran out of euro notes altogether, which could happen within days.
"We are probably almost there," said Antonio Garcia Pascual, an analyst with Barclays in London.
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