ATHENS, Greece (AP) — 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 euros ($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 euros? 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 program, Greece will lose access to the remaining 7.2 billion euros ($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 euros, 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 percent at 4,877 while Germany’s DAX fell 3.5 percent 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. The country’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.”
____
Kantouris reported from Thessaloniki, Greece. Lorne Cook in Brussels, Lori Hinnant in Paris and Pan Pylas in London contributed.
Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
" You can only take out €60 at a time " .
In related news, Apple, Inc. (AAPL) today announced plans to purchase Greece. It will be rebranded as iNation.
It seems that for Mr. Tsipras, “democratic process” is a code word for “we refuse to pay back our loans”. And after knowing about the deadline for months, Mr. Tsipras suddenly remembered a few days before it expired that a referendum was in order. Everyone else appreciated what a reliable negotiating partner Greece is.
Anyways the crux is this: Greece owes a lot of money and will default very soon unless it is loaned more money to pay off the old debts. Creditors do not want to make further loans unless Greece fulfills certain conditions (tax reform, reducing spending, etc.). Greece doesn’t like those conditions so the flow of money stopped.
The ECB (European Central Bank) is prevented by its own rules from making “bad loans”, which at this point loaning money to Greece definitely is. Yes, that sucks for Greece, but don’t blame the ECB for that.
We really need an article detailing how the Greek economy was destroyed. I hear that the Euro allowed lots of capital to flow into Greece where things were relatively cheap; lots of investment. So why are the investors not taking a haircut on this rather than sink the whole national economy?
Once Greece joined the Euro (unfortunately after cooking the books to make it look like they fulfilled the criteria), it was seen as a great investment opportunity. A cheap country on the single currency, what could possibly go wrong? Lenders and investors either didn’t know or didn’t want to know that it was a risky investment. Not unlike subprime mortgage, really. The root of the problem is that the Greek economy was never fit to join the Euro, but they did (they wanted to, and they were allowed to – no one is faultless there).
That didn’t create Greece’s problems (poor governance, corruption, tax evasion, overregulation, far too large public sector) but it did make them much, much bigger.
The lenders do not want to sink the Greek economy. If they did that, they’d never get their money back. The problem is that lending Greece more money so that it could pay off older debts is not a viable long-term strategy. Greeks don’t want reforms, so the money flow now stops because no one wants to keep throwing good money after bad forever.
Basically the creditors are saying “we want you to generate a surplus” and the Greeks are saying “it’s too difficult”. It is a case of irreconcilable differences. The creditors may well have pushed too hard, then again if they hadn’t pushed they’d never get their money back either.
In the past few years, Greek debt has been effectively socialized because most of it is now held by the ECB. At this point, creditors probably consider it safe to let Greece fail, if that is what the Greek government wants. The ECB should be big enough to withstand the hit, and that is why the rest of the Eurozone started playing hardball and isn’t willing to give the Greeks more concessions for another five years. Unfortunately for Greece, after five years, everyone is just exhausted and patience has run out.