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Greece imposes capital controls, banks to close

Greece has been through five years of recession, turmoil and high unemployment.

Greece has been through five years of recession, turmoil and high unemployment.

Syndicated News
Written by Syndicated News

ATHENS — June 29, 2015: Greek banks and the Athens stock market will be closed today and capital controls will be imposed, Prime Minister Alexis Tsipras announced, pleading for calm after anxious citizens emptied ATMs in a dramatic escalation of the country’s debt crisis.

In a statement, Tsipras yesterday said the Bank of Greece had recommended a bank holiday and restriction of bank withdrawals after international creditors refused to extend the nation’s bailout beyond its June 30 expiry date, sparking default fears over an IMF loan repayment due the same day.

Amid growing concern the country was headed for financial collapse and a possible eurozone exit, the European Central Bank said earlier yesterday it would not increase its financial support to Greek banks.

In a bid to stave off panic, Tsipras said the Greek stock market would also remain closed today and he added that Athens had again requested a prolongation of the (bailout) programme.

Urging calm, he assured Greeks their deposits, were totally safe.

“Equally safe is the reimbursement of salaries and pensions,” he said.

“Any difficulties that may arise must be dealt with with calmness. The more calm we are, the sooner we will get over this situation.”

Uncertainty over how events will unfold in coming days prompted long queues of up to a hundred people to form outside some ATMs here.

“I tried many machines — five, six, eight, ten — I am not sure,” said Voula, who was on the lookout for a working ATM in the central part of the city.

“I feel anxious, sad, angry about the government,” she told AFP. “They put Greece on a very dangerous adventure.”

Since Friday night alone, 1.3 billion euros have been withdrawn from the Greek banking system, according to the head of the bank workers’ union Stavros Koukos.

A banking source in Greece said only 40 per cent of cash machines now had money in them and a host of European governments including London and Paris advised citizens travelling to Greece to carry money with them.

‘Real risk’

The Frankfurt-based ECB’s governing council earlier held a crisis telephone conference and pledged to maintain emergency liquidity assistance — keeping open its life-support for Greek banks and, by extension, the Greek state.

But it pledged no extra cash for banks, amid signs a bank run was gathering pace.

The long festering crisis took a sharp turn for the worse on Friday night after months of deadlocked negotiations between the new hard-left government of Tsipras and the country’s creditors.

The two sides have been at odds over the economic reforms demanded by the creditors in exchange for fresh cash needed to keep the Greek state afloat.

Tsipras stunned Europe on Friday night with a surprise call for a July 5 referendum on the latest cash-for-reforms package and advised voters against backing a deal that he said spelled further humiliation.

For Tsipras, austerity has been a humanitarian catastrophe for his country of about 11 million people, which has endured five years of recession, turmoil and skyrocketing unemployment.

Exasperated eurozone members, suspecting a further play for time, responded by refusing to extend the EU’s funding programme beyond a Tuesday deadline.

This will almost certainly mean Greece will be default on more than 1.5 billion euros due to the International Monetary Fund on Tuesday.

French Prime Minister Manuel Valls warned of a real risk of Greece leaving the eurozone if it citizens vote against the EU’s bailout proposals in the referendum planned for next weekend.

‘Social catastrophe’

US President Barack Obama and German Chancellor Angela Merkel also weighed in yesterday, saying Greece needed to find its way back to a path of reform without exiting the eurozone.

In a telephone call about the unfolding crisis, Obama and Merkel agreed that it was critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the eurozone, the White House said.

The International Monetary Fund, a key creditor in the negotiations accused by Athens of pushing a hardline on reforms, said it was monitoring the unfolding crisis and was ready to provide assistance.

IMF Managing Director Christine Lagarde expressed disappointment that talks had broken down between Athens and its creditors, but said she believed the eurozone was in a strong position to respond to the crisis.

“The coming days will clearly be important,” she said in a statement.

The focus now will be on quarantining Greece and containing the fallout for the other 18 members from contagion on financial markets which are set for a turbulent day today when they reopen.

The ECB — which has maintained ultra-low interest rates and launched large-scale quantitative easing measures — said it is determined to use all the instruments available within its mandate to maintain price stability.

Missing the IMF payment on Tuesday does not spell immediate formal default or even Grexit. But it would put Greece on the slippery slope towards Grexit, wrote Holger Schmieding, chief economist of Berenberg Bank.

A Grexit, Schmieding wrote, could be a social catastrophe well beyond anything the country has endured so far through the debt crisis.

Morgan Stanley investment bank now puts the chances of a Greek euro exit, or Grexit, at 60 per cent.

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