Former Finance Minister Yanis Varoufakis reveals that the capital controls imposed in June 2015 in fact created two parallel currencies in Greec, the bank euros imprisoned in the lational banking system and the currency euros in form of banknotes and coins.
“Once euro deposits are imprisoned within a national banking system, the currency essentially splits in two: bank euros (BE) and paper, or free, euros (FE). Suddenly, an informal exchange rate between the two currencies emerges.”
“The European Central Bank and its Greek branch, the Bank of Greece, actually formalized a dual-currency currency regime. A government decree stated that “Transfer of the early, partial, or total prepayment of a loan in a credit institution is prohibited, excluding repayment by cash or remittance from abroad.”
The eurozone authorities thus permitted Greek banks to deny their customers the right to repay loans or mortgages in BE, thereby boosting the effective BE-FE exchange rate.”
Furthermore, the ex Greek Finance Minister explains how businesses struggling to survive in a economy in depression and restrictions in capital movement do indeed find ways for opportunities for shadowy trades.
Of course, this shadowy trade of issuing fake invoices for non-existent goods and services has been a rather common practice in Greece since quite some time and even before the economic crisis. It’s just that the capital controls make it more difficult and businesses involved in such ‘trade’ need “cash-rich vendors like gas-station owners,” as Varoufakis points out. However, with the latest “combat tax evasion” decisions of the Finance Ministry to practically ban the payments in cash if taxpayers/consumers wants tax-breaks, soon even the “gas-station owner will not be “cash-rich” anymore.
