Interview: Greece's current problem temporary, solution to be given: expert

As the confidence of Greeks is at an all-time low with banks closed and an upcoming referendum on a new bailout program dividing the nation, questions are being raised over the repercussions of a default and a possible Grexit over the next weeks.

"A disorderly default may lead to the collapse of the banking system and the consequences will be out of control," Charalampos Gotsis, professor of Economics at the University of Piraeus told Xinhua on Thursday.

However, the expert reassured that the problem was only temporary and a solution would be given soon.

"It is being pledged not only from the Greek government but from European institutions as well, which are represented by Angela Merkel and Francois Hollande," he said.

In order to avoid the collapse of the country's economy, the Greek government closed all banks and the Athens stock market for a week on Monday, and imposed capital controls.

Citizens can withdraw up to 60 euros each day (about 67 U.S. dollars) from the automated teller machines queuing in front of the banks.

"With capital controls, there are problems in the transactions to and from Greece. Each major transaction is examined by a banking transactions approval committee on a case-by-case basis," the professor explained.

Amid media reports that banks might not reopen next week and depositors would face losses, Gotsis noted that bank deposits of up to 100,000 euros were protected by the banking union framework. In case of a bail-in or bail-out, however, deposits over 100,000 euros would not be safe.

Asked whether a Cyprus-style "haircut" on savings was possible, the professor was negative.

"In Cyprus, the causes that led to the problems in the banking system were completely different. The Greek banking system faces problems due to the debt crisis, which we did not have earlier. So, the solutions to be given will not have immediate connection to the banking system."

However, he said a "haircut" on lower deposits would be imposed if the capitalization of banks was not sufficient and could not be assisted by other means.

Gotsis appeared optimistic that after the July 5 referendum, procedures for an immediate deal would be set, so that Greece wouldn't have to take such extreme decisions.

"The bailout proposal has painful measures that will lead to further recession. But we expect to have capital boosts from the aid package of 35 billion euros pledged by Jean-Claude Juncker and the 1.1 trillion euro stimulus addressed by European Central Bank President Mario Draghi."

For the Greek professor, neither the structure of the euro zone nor the management of the government is to blame for the dramatic developments of the past days since the problem is an outcome of the overall debt crisis.

"The most sensitive part in the economy are banks. Due to panic and fear, people run to withdraw their savings. So the deposits shrink, with an immediate effect on the capital base. In addition, in times of recession debtors cannot meet their finance obligations. So we have deposits shrinking and banks not being paid. As you can imagine, the system starts to weaken," he told Xinhua.

As far as the austerity policy implemented over the past five years, Gotsis is determined that the formula needs to be reconsidered.

"At the beginning, it was a solution when the deficits were huge. But, the deficits in the balance of payments and in the government budget have decreased."

Does he see Sunday's referendum as a choice between leaving or staying in the euro zone?

Without being certain whether the Greek government or some politicians may have hidden agendas, he noted, he expressed confidence that most Greeks want and demand to stay in the euro zone and in Europe.

"As Greece is the first member of the European Economic Community since 1961 and the 10th member of the European Union, we feel that our European citizenship goes hand in hand with our Greek one, it cannot be apart," the professor stressed. Endit