Markets slump after Greece shuts banks
Creditors don’t rule out 11th-hour debt deal, hoping to avert ‘Grexit’
World markets tumbled Monday as Greece shut its banks and imposed capital controls to halt a panic-driven run on ATMs, a day before Athens risked defaulting and possibly crashing out of the euro.
But in a narrow ray of hope, creditors left the door open for a last- ditch debt deal to try and avert a Greek eurozone exit which would raise serious questions about the future of the EU.
Calling for a compromise, German Chancellor Angela Merkel warned that “if the euro fails, Europe fails.”
European Commission head Jean Claude Juncker Monday urged Greece to vote “yes” in a referendum on bailout proposals or leave the euro.
A visibly emotional Juncker launched a blunt attack on Greek premier Alexis Tsipras, saying he felt “betrayed” by the leftist government’s behavior and adding it was time for them to tell voters “the truth.”
Global stocks f ell, with Frankfurt and Paris losing more than three percent after a slump in Asia, as investors feared a ‘ Grexit.’ The euro steadied after hitting a onemonth low under US$ 1.10 on Sunday.
Athens issued a decree to close banks until July 6 — the day after a referendum on creditors’ bailout proposals — with a 60- euro ( US$ 65) limit on ATM withdrawals. Foreign tourists, a vital engine of the Greek economy, will be exempt.
However, the drastic measures — designed to protect the banking system against the threat of mass panic — sent Greeks rushing to withdraw their daily allowance.
Jittery housewives, shoppers and business owners formed long lines at cash machines across Greece on a day dubbed “Black Monday.”
‘No money, no hope’
“No money, no hope, how did we get in this situation? This is Black Monday,” unemployed Chris Bakas, 28, told AFP as he stood sweating in the Athens sun, staring at an ATM screen.
On the city’s historic Syntagma square, the scene of fierce riots in the past over biting austerity measures imposed by the country’s international creditors, tourists snapping photographs of the parliament buildings said they felt the tension in the air.
Prime Minister Alexis Tsipras had urged restraint on Sunday after announcing the restric- tions.
“Any difficulties that may arise must be dealt with calmness. The more calm we are, the sooner we will get over this situation,” Tsipras said, adding Athens had again requested a “prolongation of the ( bailout) program.”
The Athens stock market has meanwhile been shut until July 7.
The rapid escalation of the Greek debt crisis came after the European Central Bank froze the level of its emergency lifeline for Athens on Sunday, despite a growing bank run.
EU commissioner of economic affairs, Pierre Moscovici of France, declared Monday that “the door is always open to negotiations” for Greece, adding negotiators had been “a few centimeters” from a deal when talks collapsed.
“With negotiations halted, the Greek situation has rapidly moved to the worst- case scenario and investors who jumped to the conclusion last week that a deal was done will be suffering significant losses this morning,” said strategist Alastair George at Edison Investment Research.
The Frankfurt- based ECB’s governing council on Sunday and left unchanged its emergency liquidity assistance — keeping open its life support for Greek banks and, by extension, the Greek state. But it pledged no extra cash for banks.
The move further raised the stakes in Greece’s festering debt crisis after five months of tough bailout talks culminated on Friday night with Tsipras’s shock call for a referendum.
Unless creditors heed Tsipras’s renewed request for a bailout extension, Greece’s rescue plan will formally expire Tuesday.
This will almost certainly mean Greece will default on more than 1.5 billion euros (US$1.7 billion) due to the IMF that same day.
The weekend’s rapid- fire events in the Greek saga set off a flurry of diplomatic activity.
In Berlin, Merkel is still prepared to hold talks with Greek Prime Minister Alexis Tsipras despite the breakdown in debt negotiations at the weekend, her spokesman said.
French President Francois Hollande added that Paris was “always available” for negotiations with Athens — and that a bailout deal remained possible.
People stand in a queue to use an ATM of a bank in central Athens, Sunday, June 28.