Greek banks lock for a week, capital controls in place
Anxious Greek pensioners swarmed closed bank branches Monday in the hope of getting their pensions, while queues formed at ATMs as they gradually began dispensing cash again following the imposition of strict controls on capital.
As global markets plunged following one of the most dramatic weekends in Greece's five-year financial saga, the country woke up to a changed financial landscape that many in the markets fear could be a prelude to a messy debt default and a damaging Greek exit from the euro.
The banks and the country's stock market have been closed for the week after Prime Minister Alexis Tsipras' surprise call for a referendum next Sunday on budget and reform proposals creditors are demanding Greece should take to gain access to blocked bailout funds.
Tsipras is advocating Greeks reject the proposals in the popular vote, which increasingly has the look of a vote on euro membership itself.
The sense of unease was evident in the number of pensioners lining up at bank branches hoping they might open. Many elderly Greeks don't have bank cards and make withdrawals in person at the till, and so find themselves completely cut off from their money. One of the most onerous controls is a daily limit of €60 (US$67) on cash withdrawals from ATMs.
"I came here at 4 a.m. because I have to get my pension," said 74-year-old Anastasios Gevelidis, one of about 100 retirees waiting outside the main branch of National Bank of Greece in the country's second largest city of Thessaloniki.
"I don't have a card, I don't know what's going on, we don't even have enough money to buy bread," he said. "Nobody knows anything. A bank employee came out at 8 a.m. and told us 'you're not going to get any money', but we're hearing that 70 branches will open."
The finance ministry said the manner in which pensions would be paid would be announced later Monday afternoon.
Deputy Minister of State Terence Quick said special arrangements would be made for pensions, telling private Antenna television that pensions would be dispensed in full as many pensioners don't have bank cards.
The daily withdrawal limit wouldn't be enough to cover many basic necessities. "What can I do first with €60? I owe €150 just to the pharmacy," Gevelidis said.
The capital controls are meant to staunch the flow of money out of Greek banks and spur the country's creditors to offer concessions before Greece's international bailout program expires Tuesday.
Without a deal to extend the bailout programme, Greece will lose access to the remaining €7.2 billion (US$8.1 billion) of rescue loans, and is unlikely to be able to meet a 1.6 billion-euro debt repayment to the International Monetary Fund due the same day.
The accelerating crisis has thrown into question Greece's financial future and continued membership in the 19-nation shared euro currency – and even the 28-country European Union.
Investors around the world are worried that should Greece leave the euro and say it can't pay its debts, which stand at more than €300 billion, the global economic recovery could be derailed and questions would grow over the long-term viability of the euro currency itself.
"The images of queues at ATMs in Greece are stripping traders of what little confidence they have left in the nation, and the financial earthquake that happened in the eurozone over the weekend can be felt around the world," said David Madden, market analyst at IG.
Among the major markets in Europe, the CAC-40 stock index in France was down 3.6 per cent at 4,877 while Germany's DAX fell 3.5 per cent to 11,088.
Aside from developments at the banks in Greece, massive queues formed at gas stations, with worried motorists seeking to fill up their tanks and pay with credit cards while they were still being accepted.
Although credit and cash card transactions have not been restricted, many retailers were not accepting card transactions Monday morning.
Electronic transfers and bill payments are allowed, but only within the country. The government also stressed the controls would not affect foreign tourists, who would have no limits on cash withdrawals with foreign bank cards.
For emergency needs, such as importing medicines or sending remittances abroad, the Greek Treasury was creating a Banking Transactions Approval Committee to examine requests on a case-by-case basis.
Tsipras announced the capital controls in a televised address Sunday night, blaming the eurogroup, the gathering of the eurozone's finance ministers, and its decision to reject an extension request for the bailout program. He has asked again for the extension to allow for the referendum.
French Finance Minister Michel Sapin said talks with Greece could resume at any time, while Pierre Moscovici, the European commissioner for economic affairs, said negotiations were cut off when an agreement seemed within reach.
The situation now largely rests on a 'yes' vote in Greece, Moscovici said.
The referendum decision, ratified by Parliament after a marathon 13-hour session that ended in the early hours of Sunday, shocked and angered Greece's European partners.
Greece’s negotiations with its European creditors have been suspended, with both sides accusing each other of being responsible for talks breaking off.
Greece is dividing into two camps ahead of the referendum. A demonstration is planned in Athens later Monday by those against the proposals from the creditors. Another one is planned for Tuesday by those who want to make sure that Greece's position in Europe is not threatened.
Tsipras also blamed the European Central Bank's Sunday decision not to increase the amount of emergency liquidity the lenders could access from the central bank – meaning Greece has no way to replenish fast-diminishing deposits.
"It is now more than clear that this decision has no other aim than to blackmail the will of the Greek people and prevent the smooth democratic process of the referendum," Tsipras said. "They will not succeed."