International

Greece banks shut after snap referendum call

Greece's Prime Minister Alexis Tsipras prepares for a TV interview at the State Television (ERT) in Athens, Monday, June 29, 2015. (AP Photo/Thanassis Stavrakis)

ATHENS: Stunned Greeks faced shuttered banks, long supermarket lines and overwhelming uncertainty Monday as a breakdown in talks with international lenders plunged their country deep into crisis.

With Greece’s bailout expiring on June 30 and an IMF payment falling due at the same time, Prime Minister Alexis Tsipras pleaded in vain by phone with European officials to extend the program until a referendum on July 5 on its future terms.

The frantic efforts to secure Greece’s place within the eurozone followed a dramatic weekend. Tsipras’ decision, early Saturday, to put the aid package to a popular vote took the lenders by surprise and sent Greeks rushing to cash machines. It also pushed Greece toward defaulting on 1.6 billion euros due to the IMF Tuesday, which would take it closer to an exit from the eurozone. A Greek official confirmed to Reuters that the payment would not be made.

Greeks – used to seeing lengthy talks with creditors end with an eleventh-hour deal – were shocked by the turn of events. Queues snaked outside ATMs and inside supermarkets while fears of disruptions to fuel and medicine supplies grew. Drugmakers said they would continue to ship medicines to Greece in coming weeks despite unpaid bills, but warned that supplies could soon be in jeopardy without emergency action.

The breakdown of talks pushed the EU and eurozone into uncharted terrain. The Athens stock exchange was closed like the banks, but other share markets fell on fears Greece could be heading out of the euro.

The blue-chip Euro STOXX 50 index fell more than 4 percent, with bank shares down sharply. By midday, all three major U.S. stock indexes were down more than 1 percent.

“I can’t believe it,” Athens resident Evgenia Gekou, 50, said. “I keep thinking we’ll wake up tomorrow and everything will be OK.”

After months of talks, Greece’s exasperated European partners have put the blame for the crisis squarely on Tsipras for rejecting a package they consider generous. The Greek side argues that pension cuts and tax hikes demanded of it would only deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

A snap Reuters poll of over 70 economists and traders taken Monday put the probability of Greece leaving the eurozone at 45 percent, up from 30 percent a week ago.

Emotions were unusually raw among Europe’s leaders. EU Commission President Jean-Claude Juncker said he felt personally betrayed and told Greeks a “No” vote would be seen as signaling a euro exit – a position that other European leaders lined up to echo.

“I will say to the Greeks, who I love deeply: You mustn’t commit suicide because you are afraid of death,” Juncker told a news conference.

Despite the acrimony over the weekend, the creditors said the door to negotiations remained open.

French President Francois Hollande appealed to Tsipras to return to the negotiating table and German Chancellor Angela Merkel said she was ready to restart talks with Athens after the referendum, including on how to ease its debt burden.

Hollande spoke to U.S. President Barack Obama, and Hollande’s aide said they had agreed to work together for a resumption of talks and a solution to the crisis to ensure Greece’s financial stability.

Greece’s banks shut after the European Central Bank rejected its request for 6 billion euros of additional emergency funding Sunday to cope with large withdrawals, though the ECB is expected to allow Greek banks to keep using existing funds until the referendum, people with knowledge of the matter told Reuters.

As Tsipras announced the closure of banks and the stock exchange late Sunday, long queues grew outside ATMs as people raced to take out cash before it was too late. Machines remained closed until midday Monday, and then opened for withdrawals of no more than 60 euros a day.

“I’ve got 5 euros in my pocket, I thought I would try my luck here for some money. The queues in my neighborhood were too long yesterday,” said plumber Yannis Kalaizakis, 58, outside an empty cash machine.

Pensioners hoping that they, at least, would be allowed to receive money were turned away from banks. Businesses complained that they could not pay salaries or suppliers and had had to halt imports, while agricultural production was also expected to be affected.

Despite the financial shock, parts of daily life went on as normal, with shops, pharmacies and supermarkets opening and Greeks meeting to discuss their country’s fate at cafes and restaurants.Tsipras’ Syriza party called a rally for Monday evening to protest against austerity measures and urge citizens to vote “No” in Sunday’s referendum asking: “Should the proposal which was submitted by the European Commission, the European Central Bank and the International Monetary Fund at the Eurogroup of June 25, 2015 which consists of two parts that together constitute their comprehensive proposal be accepted?”

Syriza says a “No” will strengthen its hand at the negotiating table, though other European leaders say it will push Greece out of the euro. No opinion polls were available, but the Economist Intelligence Unit said a “No” vote was more likely, raising the chances of Greece leaving the eurozone to 60 percent.

 
A version of this article appeared in the print edition of The Daily Star on June 30, 2015, on page 1.

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