AS Cyprus’s financial system imploded in the spring of 2013, the island’s leaders were given an ultimatum: sign up for a bailout deal or watch your banking system collapse.

    The brief, painful drama that unfolded on the Mediterranean island led to the first capital controls in the eurozone to stem a bank run and stop money fleeing the country.

    With Greeks pulling billions out of banks on fears that their country will default, the same drama risks being played out in Greece this time unless the government clinches a last-ditch debt deal with international creditors this week.

    Like Cyprus then, Greek banks are now relying on emergency liquidity assistance (ELA) authorized by the European Central Bank to cope with deposit outflows which accelerated last week as Athens and its lenders remained deadlocked.

    For economist Michael Sarris there is little doubt what will happen if the ECB pulls the plug on Greece.

    “Basically they would have to close in half an hour,” he said, referring to Greek banks.

    He should know. As Cypriot finance minister in 2013, Sarris was forced into a deal contingent on winding down a bank on an ELA lifeline. A second bank was forced to raid its clients deposits to recapitalize, a process known as a “bail-in.”

    Athens is similarly at risk of having its ELA funding cut if it fails to comply with European creditors’ demands and defaults on an International Monetary Fund repayment due by June 30.

    Greeks pulled out more than 4 billion euros from the banking system last week, prompting the ECB to meet for a second time to raise the ELA ceiling. That will only keep the banks afloat until early this week when the decision will be reviewed again.

    Greece’s government has strongly denied that it is planning capital controls.

    (SD-Agencies)