Greece will close banks for 6 days, impose limits on withdrawals

by Jun 29, 2015All Articles

Greek leaders planned to shutter their banks for six business days starting Monday and impose strict limits on ATM withdrawals amid rising global concerns about the nation’s economic future.

Sunday’s decision to declare a bank holiday was a signal that Greece’s five-year battle to stay in the shared euro currency may swiftly be coming to an end, as leaders elsewhere urged steps to find a way to avoid that. Panicked citizens tried to pull their money from their accounts while they still could. ATMs in Athens were running out of money, and tensions were running high as Greeks stood in line for hours to scrape together cash for basic supplies. Lines mounted at gas stations as worried residents topped off their tanks for what could be a protracted period of time in a cashless nation.

“The decision not to prolong financial aid to Greece is offensive, and it’s a disgrace for Europe in general,” Prime Minister Alexis Tsipras said in a brief Sunday evening address broadcast across Greek television networks. He said he was seeking an extended and enlarged bailout from European lenders that would carry the country past Tuesday, when it will otherwise face default.

There were signs that Greece’s creditors — the International Monetary Fund and euro-zone governments — were leaving the door open to negotiations. But it remained unclear ahead of Tuesday’s IMF repayment deadline how Greece would be able to satisfactorily arrange its finances.


Tsipras said that the threat by European Union leaders to hold Greece to the deadline and not extend further assistance amounts to “blackmail.” But he gave no concrete indications that he had made any concessions that would change their minds.

Negotiations over Greece’s future have been dragging for months. The disagreements are about the extent of the painful reforms it must make to continue receiving the rescue funds that keep the nation’s finances afloat. But talks came to a halt Saturday after Tsipras announced he would hold a referendum on July 5 to ask Greeks whether they would accede to the austerity demands of the nation’s creditors. Greek leaders have urged their citizens to vote no.

The government early Monday published the decision to close banks until after the referendum, as well as to impose $66 daily limits on ATM withdrawals. Greeks can continue to pay bills online, but they cannot move their money abroad.

A Greek economic official also said that the Greek stock market would remain closed Monday. Most Asian markets were sharply lower on the news, and the euro plunged more than 1 percent against the dollar.

The decision to close the banks could help them preserve their vital remaining reserves of cash. But it also remained possible that whenever they reopen, their deposits would no longer be denominated in euros but rather another currency whose value would quickly be worth far less.

In a measure of deepening U.S. concern about the consequences for global stability if Greece is kicked out of the euro zone, President Obama and Treasury Secretary Jack Lew worked the phones over the weekend to urge European leaders to take every possible measure to keep Greece within the currency union.

The White House said that Obama and German Chancellor Angela Merkel spoke and “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 euro zone.”

And the Treasury Department said Sunday that Lew had spoken a day earlier to key European officials, urging them to maintain financial stability in the coming days — and to consider “potential debt relief.”

The decision to close the banks came after the European Central Bank announced Sunday that it would not enlarge an emergency loan program that has been a vital lifeline in recent weeks to Greece’s overextended financial institutions. Fearful Greeks have been pulling their money out of the banks, worried that they could lose access to it altogether or that it could turn into a less valuable currency in the event Greece is kicked out of the euro zone.

Greek bank officials said that about $1.1 billion was withdrawn from banks over the weekend.

But the ECB also decided not to eliminate the emergency assistance altogether, a step that would have caused immediate bank failures and quickly cast Greece out of the euro zone.

Greek finance officials also pledged Sunday to do all they could to keep their nation on an even keel.

“The Bank of Greece, as a member of the eurosystem, will take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances,” Bank of Greece Gov. Yannis Stournaras said in a statement.

The closure sought to avoid dealing a grievous blow to Greek tourism, one of the few remaining supports to the country’s economy, by sparing foreign bank cards the withdrawal limits. Earlier Sunday, nations warned their citizens to bring extra cash to Greece if they planned to travel there.

But the consequences of Greece’s troubles extend far beyond the realm of economics. Russia has been seeking to exploit the situation by dangling the prospect of aid to Greece while calling for a conciliatory approach toward its actions in the Ukrainian conflict. Top Greek cabinet officials have expressed sympathy for Russian President Vladimir Putin, and in the European Union’s consensus-driven decision-making system, even a single dissenting nation’s vote is enough to put an end to sanctions against Russia.

Tsipras has been seeking a decision to unlock the final $8.1 billion installment of emergency funds to help pay for Greece’s short-term financial needs. Without the money, Greece will default on a Tuesday repayment of a $1.7 billion IMF loan. The international bailout program for Greece will expire Tuesday, removing a significant financial shield.

E.U. finance ministers said Saturday that Tsipras’s decision to hold a referendum signaled an effective end to the negotiations, and they met immediately to start discussions about how they would bolster the remainder of the euro system if Greece leaves it.

But with less than 48 hours before a default, IMF Managing Director Christine Lagarde on Sunday indicated that the organization remained willing to keep talking, keeping open a window of hope that a deal could be reached.

Lagarde said in a statement that she had “shared my disappointment and underscored our commitment to continue to engage with the Greek authorities.”

No nation has left the 19-member common currency system since it was started in 1999, and any exit would bring unpredictable consequences. But E.U. leaders say they are far better prepared to guard against Greece’s exit than they were in 2011 and 2012, when the possibility first arose.

The mechanics of a Greek exit from the euro zone also remained deeply unclear, because there are no procedures for doing so. Austrian Finance Minister Hans Jörg Schelling suggested in an interview with the Austrian daily Die Presse that Greece would have to leave the European Union altogether.

ATMs across central Athens were empty Sunday evening, as worried Greeks pulled as much money as they could from their accounts ahead of an unpredictable week. At the few ATMs that were still dispensing cash, long lines quickly formed.

“Everybody was taken by surprise, and people started panicking,” said John Tzamaloukas, 35, who waited 90 minutes to reach the front of an ATM line in central Athens, only to have the machine run out shortly before his turn.

He said he had a month-old daughter and needed cash to buy the basics.

“You need money to buy milk,” he said.

by Michael Birnbaum

Source: The Washington Post

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