Yanis Varoufakis, the former Greek Finance Minister, critically analyses the impact of capital controls on the currency situation in Greece.
“Greece today (and Cyprus before it) offers a case study of how capital controls bifurcate a currency and distort business incentives. The process is straightforward. 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.”
To paraphrase Orwell – all euros are equal, but some euros are more equal than others.