Greece lurches toward financial doom
Banks closed as EU refuses to increase level of emergency loans
ATHENS —Grim uncertainty reigned in the Greek capital Sunday as Athenians quietly trudged from bank to bank searching for ATMs that were still dispensing euros.
Their luck will certainly be worse Monday as Greece enters a new, totally uncharted phase in its financial death spiral.
The country’s banks and stock markets will be closed for at least several days and strict capital controls are to be introduced, the government said, after a weekend of high drama here and at the European Union’s headquarters in Brussels that began when talks regarding the country’s bailout package stalled on Friday.
Calling for “patience and composure,” Greece’s Prime Minister, Alexis Tsipras, insisted Sunday in a tweet that “the bank deposits of the Greek people are fully secure.”
The decision to temporarily cut Greeks off from their money and severely limit the amount of money that individuals and businesses can send abroad came hours after the European Central Bank (ECB) declared that it would not increase the level of emergency loans that it has been providing for several months to the country’s already shaky banks.
Those cash injections, believe to already total nearly 90 billion euros, have been flown in every night from western Europe. The funds had made it just possible for the banks to cope with a multibillion euro run on their accounts that began two weeks ago and escalated sharply in recent days.
The establishment of capital controls by Tsipras’s left-wing government was designed to try to contain the escalating damage from a protracted debt crisis that, barring unexpected last-minute concessions by international creditors, may finally come to a head Tuesday. That is when Greece will fail to make a scheduled 1.6-billion euro debt payment to its international creditors, effectively killing a 245-billion euro ($326 billion) bailout package.
Calling Europe’s demand that Greece further slash pensions and increase taxes “appalling,” and saying that Greece had “a clear conscience,” Tsipras broke off talks with officials in Brussels late Friday, then called a referendum for Sunday, July 5, on whether to accept the creditors’ terms, which he angrily denounced as too onerous.
The ECB responded Saturday by declaring that it would no longer provide any bridge financing to get Greece past Tuesday’s next repayment deadline. However, it did say it was still willing to hold talks with Athens.
“It is clearer than ever that this decision has no other goal apart from blackmailing the Greek people and obstructing the smooth democratic procedure of the referendum,” Tsipras said in a nationally televised speech late Sunday.
The prevailing mood in Athens on the eve of what may be the last battle in Greece’s nearly five-year struggle to avoid bankruptcy and Grexit, or eviction from Europe’s common currency, was mostly despair, bewilderment and a sense that Europe had turned its back on the country.
There were cheers Sunday from those who managed to find an ATM that had not already been tapped out. Those who got a “temporarily unable to withdraw funds” sign when they inserted their bank cards threw their hands up in despair.
Anxious drivers queued for gas amid fears that Greece would no long be able to pay to import fuel. And merchants whose entire business depends on foreign tourists who come to marvel at the Parthenon and other ancient ruins wondered whether capital controls meant they would be unable to access payments made on credit cards.
To explain how grave Greece’s financial problems are, a young soldier from Thessaloniki bound for Cyprus said he had just finished an exercise during which his unit had been told they would get to shoot 10 bullets. As it turned out, he was only handed five bullets. After firing four of them he was told to save the fifth.
It was particularly telling that for once in this soccermad country, news bulletins and political talk shows ran on every television screen in the city’s many smoke-filled bars and coffee shops.
Riot police stood outside one of the few ATMs that was still spitting out euros, but they would not say if they were there to protect the fortunate few who were able to withdraw money or to protect the nearby finance ministry, where scores of television cameramen and journalists lurked in a dark side street.
The robust police presence seemed a bit premature as the city was calm and there was little overt anger, but there has already been euro-related rioting here several times this year. About 25 per cent of the population is already unemployed and youth unemployment almost touches 50 per cent.
The only Greek industry that is prospering is tourism. But several hoteliers, waiters and merchants who work in the sector feared Sunday that tourists would flee if violence erupted or if there were fuel shortages.
Political opinion was sharply divided already between those who blamed Tsipras for not settling on Europe’s terms, no matter how draconian they were, and others who lauded him for not backing down. Although there are no statistics to support the contention, a commonly expressed opinion Sunday was that Europe owed Greece more than Greece owed Europe. There were also defiant boasts that no matter how intense the financial hurricane that was about to hit the country, Greece was strong enough and rich enough to survive the coming storm.
Tsipras insists that Greece wants to remain in the eurozone. That is what about 70 per cent of the population has told pollsters, too.
One of the many reasons that makes it impossible to predict if Greece will be able to keep the euro is that there is no formal mechanism to evict any country from the eurozone. This is because that eventuality had never been contemplated when the common currency was created in 1999.
Another round of last-ditch talks between Greece and its creditors may take place Monday.