ATHENS: Greece announced early Monday it will shut banks for a week and impose capital controls, pleading for calm after anxious citizens emptied cash machines in a dramatic escalation of the country’s debt crisis.
Banks will be closed until July 6—the day after a referendum on bailout proposals—with a 60-euro ($65) limit on ATM withdrawals, but foreign tourists, a vital engine of the Greek economy, will be exempt from the restrictions, a decree published in the official government gazette said.
In the first market reaction to the growing risk of a Greek euro exit, the single currency tumbled in Asia Monday morning.
Stock markets also fell sharply, with Tokyo, Sydney, Shanghai and Hong Kong each sinking more than 2 percent by Monday afternoon.
The drastic measures to protect Greece’s banking system against the threat of mass panic came after the European Central Bank (ECB) said it would not increase its financial support to Greek lenders, despite early signs of a chaotic bank run.
It capped a weekend of high drama that began with Prime Minister Alexis Tsipras’s unexpected call for a July 5 referendum on creditors’ latest reform proposals after bailout talks in Brussels collapsed.
In response, angry EU and IMF creditors rejected a request to extend the nation’s bailout beyond its June 30 expiry date, sparking fears Greece could default on a key debt payment to the IMF due the same day and possibly crash out of the eurozone.
Uncertainty over how events will unfold in coming days prompted crowds to form long queues outside some ATMs in Greece, leaving many cash machines dry.
Keen to stave off panic, Tsipras assured Greeks their deposits were
“Any difficulties that may arise must be dealt with calmness. The more calm we are, the sooner we will get over this situation,” he said, adding that Athens had again requested a “prolongation of the [bailout]program.”
With the Athens stock exchange closed Monday, other global markets were expected to follow Asia’s lead in what is set to be a highly volatile day of trade as investors return to their desks to find Greece hurtling toward default.
“We have had a slow bank jog in Greece and most thought that there would be an agreement eventually, at the last minute. That is no longer true,” said Emma Lawson, a senior currency strategist at National Australia Bank.
‘Open to proposals’
The Frankfurt-based ECB’s governing council earlier Sunday held a crisis telephone conference and pledged to maintain 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 on creditors’ latest cash-for-reforms offer.
Unless creditors heed Tsipras’s renewed request for a bailout extension, Greece’s rescue plan will formally expire on Tuesday. This will almost certainly mean Greece will default on more than 1.5 billion euros ($1.7 billion) due to the IMF that same day.
Greek Finance Minister Yanis Varoufakis said there was still time for a compromise, urging creditors to show some “goodwill” and come up with an improved proposal ahead of the plebiscite.
“We remain open to new proposals by the [creditor]institutions,” he told the German daily Bild.
The weekend’s rapid-fire events in the Greek saga set off a flurry of diplomatic activity for Monday.
In a tweet, an EU spokesman said European Commission head Jean-Claude Juncker would hold a press conference at 10:45 a.m. local time to discuss the latest developments on Greece.
In Berlin, German Chancellor Angela Merkel called an emergency meeting with the heads of parliamentary groups and party leaders, while French President Francois Hollande will chair crisis talks with key ministers in Paris.
In Japan, top government spokesman Yoshihide Suga said G7 finance ministers had held consultations over the weekend, calling the breakdown of talks “extremely regrettable.”
“We appreciate that eurozone finance ministers on June 27 announced they, together with the ECB, will do everything they can for the stability of the eurozone,” he told a press conference Monday.
‘There is no more money’
A banking source in Greece said only 40 percent of cash machines now had money in them.
In Athens, teacher Yiannis Grivas told Agence France-Presse he had withdrawn his entire 940-euro salary on Friday so “I have enough to live on for a few weeks.”
He added: “I am not afraid of capital controls, I never take out more than 50 euros a day anyway.”
In the capital’s upscale Kolonaki area, 32-year-old Anna tried in vain to find a working cash machine.
“There is no more money,” she said, adding that she hoped her countrymen would vote in the referendum “to stay in the eurozone and the European Union” and that “the nightmare will finally end.”
Since Friday night alone, 1.3 billion euros ($1.45 billion) have been withdrawn from the Greek banking system, according to the head of the bank workers’ union Stavros Koukos.
French Prime Minister Manuel Valls warned of a “real risk” of Greece leaving the eurozone if Greeks vote against the EU’s bailout proposals in the planned referendum.
But Tsipras, whose Syriza party came to power in January on an anti-austerity platform, has advised voters against backing a deal he said spelled further “humiliation” for a country that has endured five years of recession, turmoil and skyrocketing unemployment.