What choices do the Greek Banks have?

Greece became the first advanced economy to default on the IMF and it now faces a race against time to secure new refinancing before a €3.5 billion bond repayment is due to the European Central Bank on 20 July, with another €16 billion of repayments and debt roll-overs due by mid-September. However, a more immediate problem is restoring the Greek financial system, as its banks are very quickly running out of cash. Greek banks are urgently in need of a lender of last resort, but at present it is hard to see how the ECB or IMF can perform that task as Greek banks may not have adequate 'real' collateral to pledge as security for new loans. Consequently, there are only two options: the central bank of Greece could make unsecured loans to Greek banks, although this would break ECB rules. Alternatively, it can create a new currency and exit the European currency union, which might lead to a rapid currency depreciation which would boost growth, but underpin a surge in inflation and a permanent reduction in living standards. (VIEW LINK)