Thursday 8 December 2016

Crisis Mode: Greece to keep banks shut on Monday as people queue to withdraw money

Lefteris Papadimas and John O'Donnell

Published 28/06/2015 | 18:00

A woman talks to a bank employee outside a National Bank branch in Athens, Greece June 28, 2015. Greece's European partners shut the door on extending a credit lifeline to Athens, leaving the country facing a default that could push it out of the euro and cause ripple effects across the European economy and beyond. REUTERS/Marko Djurica
A woman talks to a bank employee outside a National Bank branch in Athens, Greece June 28, 2015. Greece's European partners shut the door on extending a credit lifeline to Athens, leaving the country facing a default that could push it out of the euro and cause ripple effects across the European economy and beyond. REUTERS/Marko Djurica
People stand in a queue to use ATMs of a bank in central Athens, Sunday, June 28, 2015. Greece is anxiously awaiting a decision by the European Central Bank on whether to increase the emergency liquidity assistance banks can draw on from the country's central bank. (AP Photo/Thanassis Stavrakis)
People use ATMs outside a National Bank branch in Athens, Greece June 28, 2015. Greece's European partners shut the door on extending a credit lifeline to Athens, leaving the country facing a default that could push it out of the euro and cause ripple effects across the European economy and beyond. REUTERS/Marko Djurica
A man (R) reacts as people line up to withdraw cash from an ATM outside a Eurobank branch in Athens, Greece June 28, 2015. The Greek government will on Sunday night consider imposing capital controls and closing the country's banks on Monday, Greek Finance Minister Yanis Varoufakis has told BBC Radio. REUTERS/Alkis Konstantinidis
People line up to withdraw cash from an ATM outside a Eurobank branch in Athens, Greece June 28, 2015. The Greek government will on Sunday night consider imposing capital controls and closing the country's banks on Monday, Greek Finance Minister Yanis Varoufakis has told BBC Radio. REUTERS/Alkis Konstantinidis
A man (L) puts money in his wallet as people line up to withdraw cash from an ATM outside a Eurobank branch in Athens, Greece June 28, 2015. The Greek government will on Sunday night consider imposing capital controls and closing the country's banks on Monday, Greek Finance Minister Yanis Varoufakis has told BBC Radio. REUTERS/Alkis Konstantinidis
Former Greek conservative Prime Minister Antonis Samaras, leader of the opposition New Democracy party, attends a meeting with Greek President Prokopis Pavlopoulos (R) at the Presidential Palace in Athens, Greece June 28, 2015. REUTERS/Alkis Konstantinidis
Greek Finance Minister Yanis Varoufakis leaves after a meeting at the office of Prime Minister Alexis Tsipras in Maximos Mansion in Athens, Greece June 28, 2015. REUTERS/Marko Djurica
Greek Finance Minister Yanis Varoufakis leaves on his motorbike after a meeting at the office of Prime Minister Alexis Tsipras in Maximos Mansion in Athens, Greece June 28, 2015. REUTERS/Marko Djurica

Greece banks will remain shut tomorrow.

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The decision to keep the banks shut was made at an emergency meeting in Athens this evening.

People line up to withdraw cash from an ATM outside a Eurobank branch in Athens, Greece June 28, 2015. Greece's finance minister denied saying the government preferred the imposition of capital controls, saying the move would be incompatible with the concept of a monetary union, a statement from his ministry said on Sunday. REUTERS/Yannis Behrakis
People line up to withdraw cash from an ATM outside a Eurobank branch in Athens, Greece June 28, 2015. Greece's finance minister denied saying the government preferred the imposition of capital controls, saying the move would be incompatible with the concept of a monetary union, a statement from his ministry said on Sunday. REUTERS/Yannis Behrakis
People line up to withdraw cash from an ATM outside an Alphabank branch in Athens, Greece June 28, 2015. Greece's finance minister denied saying the government preferred the imposition of capital controls, saying the move would be incompatible with the concept of a monetary union, a statement from his ministry said on Sunday. REUTERS/Yannis Behrakis

Read more here: IMF chief Christine Lagarde voices disappointment over Greece stalemate  

Earlier today, the government said it may impose capital controls and keep its banks shut on Monday after creditors refused to extend the country's bailout and savers queued to withdraw cash, taking Athens' standoff with the European Union and the International Monetary Fund to a dangerous new level.

Read more here: 7 scenarios for Greece in the coming days  

Greece's banks, kept afloat by emergency funding from the European Central Bank, are on the front line as Athens moves towards defaulting on a 1.6 billion euros payment due to the International Monetary Fund on Tuesday.

People line up to withdraw cash from an ATM outside a Eurobank branch in Athens, Greece June 28, 2015. The Greek government will on Sunday night consider imposing capital controls and closing the country's banks on Monday, Greek Finance Minister Yanis Varoufakis has told BBC Radio. REUTERS/Yannis Behrakis
People line up to withdraw cash from an ATM outside a Eurobank branch in Athens, Greece June 28, 2015. The Greek government will on Sunday night consider imposing capital controls and closing the country's banks on Monday, Greek Finance Minister Yanis Varoufakis has told BBC Radio. REUTERS/Yannis Behrakis
Former Greek conservative Prime Minister Antonis Samaras (L), leader of the opposition New Democracy party, shakes hands during a meeting with Greek President Prokopis Pavlopoulos (R) at the Presidential Palace in Athens, Greece June 28, 2015. Europe's grand project to bind its nations into an unbreakable union by means of a common currency lurched into uncharted waters after EU governments refused funding to save Greece from defaulting on its debts. REUTERS/Alkis Konstantinidis

The European Central Bank added to the pressure by saying there would be no increase in its support of Greece's crippled banking system. It was monitoring the situation and stood ready "to reconsider its decision," the ECB added.

 

Amid drama in Greece, where a clear majority of people want to remain inside the euro, the next few days present a major challenge to the integrity of the 16-year-old euro zone currency bloc. The consequences for markets and the wider financial system are unclear.

"It is a dark hour for Europe....nevertheless from where we're sitting we have a clear conscience," Greek Finance Minister Yanis Varoufakis said in an interview with the BBC.

Greek President Prokopis Pavlopoulos waits before a meeting with former Greek conservative Prime Minister Antonis Samaras, leader of the opposition New Democracy party, at the Presidential Palace in Athens, Greece June 28, 2015. Europe's grand project to bind its nations into an unbreakable union by means of a common currency lurched into uncharted waters after EU governments refused funding to save Greece from defaulting on its debts. REUTERS/Alkis Konstantinidis
Greek President Prokopis Pavlopoulos waits before a meeting with former Greek conservative Prime Minister Antonis Samaras, leader of the opposition New Democracy party, at the Presidential Palace in Athens, Greece June 28, 2015. Europe's grand project to bind its nations into an unbreakable union by means of a common currency lurched into uncharted waters after EU governments refused funding to save Greece from defaulting on its debts. REUTERS/Alkis Konstantinidis
A young girl hugs her mother while lining up with other people to withdraw cash from an ATM outside a National Bank branch in Athens, Greece June 28, 2015. Greece said it may impose capital controls and keep its banks shut on Monday after creditors refused to extend the country's bailout and savers queued to withdraw cash, taking Athens' standoff with the European Union and the International Monetary Fund to a dangerous new level. REUTERS/Alkis Konstantinidis

Of bank closures and capital controls he said: "This is a matter that we'll have to work overnight on with the appropriate authorities both here in Greece and (with the ECB) in Frankfurt." The finance ministry later issued a statement saying capital controls were not the government's preference.

Read more here: ECB should not cut support for Greek banks - French Prime Minister  

Greece's left-wing Syriza government had for months been negotiating a deal to release funding in time for its IMF payment. Then suddenly, in the early hours of Saturday, Prime Minster Alexis Tspiras asked for extra time to enable Greeks to vote in a referendum on the terms of the deal.

Creditors turned down this request, leaving little option for Greece but to default, piling further pressure on the country's banking system.

Tourists make their way past a European Union flag and a Greek national flag at the seaside of the island of Paros, Greece June 26, 2015.
REUTERS/Matthias Williams
Tourists make their way past a European Union flag and a Greek national flag at the seaside of the island of Paros, Greece June 26, 2015. REUTERS/Matthias Williams
A man reads a newspaper while sitting in a taverna at the island of Paros, Greece June 26, 2015. A rise in consumer taxes on Greek islands' goods and services is one of the sacrifices creditors are seeking from Athens to unlock bailout funds that will allow Greece to remain in the euro. REUTERS/Matthias Williams

The creditors want Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

Pro-European Greek opposition parties have united in condemning the decision to call the referendum on the bailout terms, but people on the streets of Athens backed the decision.

Read more here: Greece's parliament vote in favour of holding July referendum  

"I want him (Tsipras) to knock his fist on the table and to say 'enough!'," said resident Evgenoula.

Many leading economists have voiced sympathy with the Greek government's argument that further cuts in spending risk choking off the growth which would give Greece some prospect of servicing debts worth nearly twice its annual national income.

The IMF has pressed European governments to ease Athens' debt burden, something most say they will only do when Greece first shows it is trimming its budget.

STOCKING UP ON CASH

Long lines formed outside many ATMs on Sunday, including some of 40 to 50 people outside some in central Athens.

The Bank of Greece said it was making "huge efforts" to ensure the machines remained stocked.

Read more here: Greek pain is set to continue despite a Herculean effort  

The German foreign ministry said tourists heading to Greece should take plenty of cash to avoid possible problems with local banks and some tourists said they were joining the ATM queues.

"I am trying to go over to the bigger banks," said Cassandra Preston, a Canadian tourist. "I am here for another month and I would like to make sure I have some cash on me."

The European Central Bank's funding line, which is a form of overdraft with the euro zone's central bank system, would fall to the bloc's other members to pay if Greece were to leave the euro zone. This has fuelled opposition to extending the line in some European countries.

Read more here: Europe is heading into uncharted waters - Noonan  

In economic powerhouse Germany, other southern states that have suffered austerity in return for EU cash and poor eastern countries with living standards much lower than Greece's, many voters and politicians have run out of patience.

German Finance Minister Wolfgang Schaeuble openly questioned the solvency of Greek banks - a key condition to qualify to receive such finance.

"The ECB has always said that as long as Greek banks are solvent, then emergency loans, the ELA, can be granted," he said on Saturday. "And now there is naturally a new situation that because of the developments the liquidity and solvency of Greek banks, or some Greek banks, could be in doubt."

German Chancellor Angela Merkel has invited leaders of all the major German parties to a meeting in Berlin on Monday to discuss the crisis.

DEAL STILL POSSIBLE

The 18 other countries sharing the euro countries have blamed Greece for breaking off negotiations and pledged to do whatever it takes to stabilize the common currency area.

Read more here: A Grexit would be disastrous and could signal disintegration of euro  

European Council President Donald Tusk said on Sunday he was in contact with all the governments of the euro zone to ensure Greece remained in the single currency

Several officials said there was still time to return to the negotiating table.

"To those who wonder what's next, 1. Greece should stay in euro; 2.The door is still open for negotiations on latest EU Commission proposals," EU Economics Commissioner Pierre Moscovici said.

French Prime Minister Manuel Valls on Sunday urged the Greeks to continue talks.

"I cannot resign myself to Greece leaving the euro zone ... We must find a solution," Valls told Europe 1, Le Monde and iTELE in a joint interview.

Read more here: Crisis mode: Euro zone readies for Greek default  

International Monetary Fund boss Christine Lagarde said that if the July 5 vote produced "a resounding yes" to remain in the euro and fix the Greek economy then the creditors would be willing to make an effort.

Reuters

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