By:
mryash
on 3:17 AM
by Jenny ParisChristos and ZiotisPaul Tugwell
Greece moved to avert the collapse of its financial system, shutting
lenders and imposing capital controls as of Monday, a measure that will
deepen the recession and risk driving the nation toward an exit from the
euro.
The move to husband resources followed the breakdown of aid talks with the international creditors late Friday and the European Central Bank decision to freeze its lifeline to Greek banks. On the streets, lines at ATMs and gas stations signified how daily life was about to be disrupted.
With cash flooding out at a record pace and its financial backstop gone, Greece would become the second euro-area country, after Cyprus in 2013, to declare a bank holiday and impose capital controls. European officials, meantime, discussed quarantining Greece from the rest of the currency bloc, while keeping it from spinning out of the euro’s orbit.
“A very dark day for Greece,” Nicholas Economides, a professor at New York University’s Stern School of Business, said by telephone. “The Greek economy, already at standstill, will go to deep freeze.”
The euro fell in Asian trading, sliding 1.5 percent to $1.0996 at 02:15 a.m. in Athens. Greek Prime Minister Alexis Tsipras said the steps were recommended by the Bank of Greece in a meeting Sunday afternoon of the country’s financial-stability authority.
The measures to restrict capital movement won’t apply to holders of foreign bank accounts who have credit and debit cards issued abroad, according to a Greek government official who asked not to be named in line with policy. That means Greeks with accounts overseas or visitors to Greece won’t be affected.
German Chancellor Angela Merkel spoke to President Barack Obama on Sunday, agreeing on the importance of keeping Greece in the euro. In telephone calls on Saturday, U.S. Treasury Secretary Jacob J. Lew urged creditors to find a sustainable solution, including debt relief, for Greece, according to a Treasury statement. He has urged Tsipras to coordinate on the use of capital controls as needed, the statement said.
Banks will remain shut until at least the plebiscite, Kathimerini newspaper reported, citing unnamed sources.
The weekend developments marked an abrupt turn from last week, when markets rallied on hopes that a deal between Tsipras’s anti-austerity government and the creditors -- comprising the ECB, European Commission and International Monetary Fund was at hand.
The optimism vanished after midnight on Friday when Tsipras shocked his counterparts across the region with his call for a July 5 referendum on the austerity demanded by creditors, just days before the June 30 expiry of the current bailout and a $1.7 billion payment due to the IMF.
In the aftermath, Greeks lined up this weekend to get access to as much of their money as they could. Two senior Greek bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning. Skai television reported as much as 1 billion euros ($1.1 billion) was withdrawn.
Greek bank deposits shrank by 30 billion euros between January and May this year to 129.9 billion euros, according to data released by Bank of Greece on its website on Thursday.
Tsipras moved to bolster confidence and focus blame on his creditors, who have demanded continued austerity after extending 240 billion euros in bailout commitments since 2010.
“The dignity of the Greek people in the face of blackmail and injustice will send a message of hope and pride to all of Europe,” he said in a televised statement, maintaining the confrontational tone that has characterized his six-month old government.
On Sunday night, long queues formed at numerous gas stations in Athens, reflecting doubts over the country’s ability to keep importing fuel. Lines at ATMs receded, as machines emptied.
While Tsipras and his government urged a “no” vote in the referendum, he repeated his request to the European Commission to extend the bailout at least until the ballot.
The move to husband resources followed the breakdown of aid talks with the international creditors late Friday and the European Central Bank decision to freeze its lifeline to Greek banks. On the streets, lines at ATMs and gas stations signified how daily life was about to be disrupted.
With cash flooding out at a record pace and its financial backstop gone, Greece would become the second euro-area country, after Cyprus in 2013, to declare a bank holiday and impose capital controls. European officials, meantime, discussed quarantining Greece from the rest of the currency bloc, while keeping it from spinning out of the euro’s orbit.
“A very dark day for Greece,” Nicholas Economides, a professor at New York University’s Stern School of Business, said by telephone. “The Greek economy, already at standstill, will go to deep freeze.”
The euro fell in Asian trading, sliding 1.5 percent to $1.0996 at 02:15 a.m. in Athens. Greek Prime Minister Alexis Tsipras said the steps were recommended by the Bank of Greece in a meeting Sunday afternoon of the country’s financial-stability authority.
Patience, Composure
“In the coming days, what’s needed is patience and composure,” Tsipras said in a televised statement. “The bank deposits of the Greek people are fully secure. The same applies to the payment of wages and pensions -- they are also guaranteed.”The measures to restrict capital movement won’t apply to holders of foreign bank accounts who have credit and debit cards issued abroad, according to a Greek government official who asked not to be named in line with policy. That means Greeks with accounts overseas or visitors to Greece won’t be affected.
German Chancellor Angela Merkel spoke to President Barack Obama on Sunday, agreeing on the importance of keeping Greece in the euro. In telephone calls on Saturday, U.S. Treasury Secretary Jacob J. Lew urged creditors to find a sustainable solution, including debt relief, for Greece, according to a Treasury statement. He has urged Tsipras to coordinate on the use of capital controls as needed, the statement said.
Banks will remain shut until at least the plebiscite, Kathimerini newspaper reported, citing unnamed sources.
The weekend developments marked an abrupt turn from last week, when markets rallied on hopes that a deal between Tsipras’s anti-austerity government and the creditors -- comprising the ECB, European Commission and International Monetary Fund was at hand.
Share Gain
Greek shares posted their biggest weekly increase since 2008, rising 16 percent. Yields on 10-year notes closed at 10.7 percent on Friday, down from 13.4 percent in April.The optimism vanished after midnight on Friday when Tsipras shocked his counterparts across the region with his call for a July 5 referendum on the austerity demanded by creditors, just days before the June 30 expiry of the current bailout and a $1.7 billion payment due to the IMF.
In the aftermath, Greeks lined up this weekend to get access to as much of their money as they could. Two senior Greek bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning. Skai television reported as much as 1 billion euros ($1.1 billion) was withdrawn.
Greek bank deposits shrank by 30 billion euros between January and May this year to 129.9 billion euros, according to data released by Bank of Greece on its website on Thursday.
ECB Blow
The ECB delivered its blow on Sunday afternoon. The central bankers froze the ceiling on Emergency Liquidity Assistance to Greek lenders at just below 89 billion euros, refusing for the first time this year to maintain a buffer as deposits fled.Tsipras moved to bolster confidence and focus blame on his creditors, who have demanded continued austerity after extending 240 billion euros in bailout commitments since 2010.
“The dignity of the Greek people in the face of blackmail and injustice will send a message of hope and pride to all of Europe,” he said in a televised statement, maintaining the confrontational tone that has characterized his six-month old government.
On Sunday night, long queues formed at numerous gas stations in Athens, reflecting doubts over the country’s ability to keep importing fuel. Lines at ATMs receded, as machines emptied.
While Tsipras and his government urged a “no” vote in the referendum, he repeated his request to the European Commission to extend the bailout at least until the ballot.
