Ahead of referendum, Greece shuts banks to avoid financial collapse
Derek Gatopoulos and Costas Kantouris, The Associated Press
Published Monday, June 29, 2015 3:58AM EDT
Last Updated Monday, June 29, 2015 9:47PM EDT
ATHENS, Greece -- Anxious pensioners swarmed closed bank branches Monday and long lines snaked outside ATMs as Greeks endured the first day of serious controls on their daily economic lives ahead of a July 5 referendum that could determine whether the country has to ditch the euro currency and return to the drachma.
A supporter of the NO vote in the upcoming referendum, holds an old 1,000 drachma bank note during a rally in the northern Greek port city of Thessaloniki, Monday, June 29, 2015. (AP / Giannis Papanikos)
As strict capital controls took root following Prime Minister Alexis Tsipras' surprise weekend decision to call a referendum on international creditors' latest economic proposals, Greece's population tried to fathom the sheer scale of the impact on their day-to-day existence.
Following a breakdown in talks between Greece and its creditors, the country is in the midst of the one of the most acute financial crises seen anywhere in the world in years. It's running out of time to get the money it needs to stave off bankruptcy.
That has stoked fears of a crippling bank run, a messy Greek debt default and an exit from the euro. As a result, the country's government imposed strict capital controls, none more onerous than a daily allowance of a measly 60 euros ($67) at the ATM.
The sense of unease was palpable among the crowds of pensioners who lined up outside bank branches hoping they might open. Many elderly Greeks don't have ATM cards and make cash withdrawals in person, and so found themselves completely cut off from their money.
Elderly people, who usually get their pensions at the end of the month, wait outside a closed bank in Athens on June 29, 2015. (AP / Petros Giannakouris)
"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 the 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.
The capital controls come ahead of a big 1.6 billion-euro payment Greece has to make to the International Monetary Fund. It's unlikely to be able to pay that without financial assistance.
Greece's bailout program with its European creditors officially expires Tuesday, meaning the country will not have access to any of the money still available if it doesn't secure a deal.
For months, the left-wing-led Greek government, elected in January on a promise to bring an end to the hated austerity that it blames for an acute economic recession, has failed to agree on a package of spending cuts and reforms demanded by creditors in exchange for access to the remaining 7.2 billion euros ($8.1 billion) in rescue loans.
An elderly woman looks through the closed shutters of a bank as others, who usually get their pensions at the end of the month, wait outside a closed bank in Athens on June 29, 2015. (AP / Petros Giannakouris)
The sight of an economy on the precipice hit global markets hard Monday. In Europe, the Stoxx 50 index of leading shares ended 2.5 per cent lower, while Germany's DAX slid 3.6 per cent. There were also some early warning signs that Greece's problems may prove contagious -- the borrowing rates of other highly indebted eurozone countries such as Italy and Portugal inched up slightly.
Meanwhile, Standard & Poor's rating agency cut Greece's credit rating further into junk status, saying it now sees a 50-per cent chance of Greece leaving the eurozone. The Greek government's decision to hold a referendum is a sign it "will prioritize domestic politics over financial and economic stability, commercial debt payments and eurozone membership," it said in a statement
Investors are worried that should Greece leave the euro and say it can't pay its debts, which stand at more than 300 billion euros, it will be forced into a chaotic return to the drachma -- developments that could derail a fragile global economic recovery, as well as raise questions over the long-term viability of the euro currency itself.
"The major market concern is that if Greece were to default and/or exit, then it might encourage others to do the same," said Gary Jenkins, chief credit strategist at LNG Capital. "Thus it puts the entire eurozone project at risk of collapse."
Tsipras is advocating Greeks reject the proposals in the referendum, which increasingly has the look of a vote on euro membership itself.
Tourists walks past a graffiti made by street artist N_Grams that read 'NO' in German but also 'YES, IN' in Greek language in Athens, on Sunday, June 28, 2015. (AP / Petros Giannakouris)
That message was hammered home by European leaders.
"I'd like to ask the Greek people to vote 'Yes.' ... I very much like the Greeks, and I'd say to them, 'You should not commit suicide because you are afraid of death,"' European Commission President Jean-Claude Juncker said in an emotional speech against a backdrop of giant Greek and EU flags.
Negotiations with Greece were not dead, German Chancellor Angela Merkel and her deputy insisted -- as long as Greeks support that path in the July 5 vote.
"It must be crystal clear what is being decided: It is essentially the question, yes or not to remaining in the eurozone," German Vice Chancellor Sigmar Gabriel said.
German Chancellor Angela Merkel briefs the media after a meeting with leaders of all parties represented in the German parliament about the Greece crisis, at the chancellery in Berlin, Monday, June 29, 2015. (AP / Markus Schreiber)
Throughout 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.
Electronic transfers and bill payments are allowed, but only within Greece. 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 medicine 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, blaming eurozone finance ministers for their rejection of an extension request to the bailout program.
The referendum decision, which has been ratified by Parliament, shocked and angered Greece's European partners.
In Greece, citizens were dividing into two camps -- with most of the opposition backing a "Yes" vote in the referendum.
"If you want to stay in the euro, vote yes ... If you want banks to open, vote yes ... And most important, if you want to stay in Europe, vote yes," former prime minister Antonis Samaras told lawmakers.
Supporters of NO vote in the upcoming referendum, gather during a rally at Syntagma square in Athens Monday, June 29, 2015. (AP / Petros Karadjias)
Chanting "Take the bailout and go!" thousands of pro-government protesters gathered outside parliament late Monday to back the government's call to vote "No."
"The government tried too hard to get this agreement. But the creditors kept asking for more," said pensioner Satroula Noutsou. "I don't know what else we are supposed to do."
Kantouris reported from Thessaloniki, Greece. Elena Becatoros in Athens, Lorne Cook and Raf Casert in Brussels, Lori Hinnant in Paris and Pan Pylas in London contributed to this report.