Greeks face shut banks as creditors reject bailout

People queueing to withdraw money from an ATM outside a branch of Greece's Alpha Bank in Athens yesterday.
People queueing to withdraw money from an ATM outside a branch of Greece's Alpha Bank in Athens yesterday.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Athens looking at capital controls as default on $2.4b payment looms

ATHENS/FRANKFURT - Greece said it may impose capital controls and keep its banks shut today after its creditors refused to extend the country's bailout and savers queued to withdraw cash, taking Athens' stand-off with the European Union (EU) and the International Monetary Fund (IMF) to a dangerous new level.

Greece's banks, kept afloat by emergency central bank funding, are on the front line as Athens moves towards defaulting on a €1.6 billion (S$2.4 billion) payment due to the IMF tomorrow.

The European Central Bank (ECB) said yesterday that it will not raise the level of emergency funding. Greece's banks have been surviving for the past few weeks on frequent incremental increases to the funding lifeline.

Sources told the BBC that a decision to end the Emergency Liquidity Assistance would be made by the ECB's governing council late yesterday.

Amid political drama in Greece, where a clear majority wants to remain inside the euro zone, the next few days present a major challenge to the integrity of the 16-year-old currency bloc.

"This is a matter that we'll have to work overnight on with the appropriate authorities both here in Greece and in Frankfurt," Greek Finance Minister Yanis Varoufakis said of bank closures and capital controls. He was speaking to BBC radio.

The finance ministry later issued a statement saying that capital controls were not the government's preference.

Mr Varoufakis told the newspaper Bild that German Chancellor Angela Merkel holds the "keys in her hand" that could help Greece get a deal with its international lenders and avert a "terrible" outcome to its debt crisis.

In an interview to appear today, Mr Varoufakis said Greece would not put forth any new proposals in talks with its lenders, and that it was now up to the EU, ECB and IMF to compromise.

"The government leaders in the EU have to act," he said. "And among them, she, the representative of the most important country, holds the keys in her hands," he said, referring to Dr Merkel.

Germany is the biggest European contributor to the bailout programmes that have kept Greece afloat for the past five years.

Greece's Syriza government had been negotiating a deal to release funding in time for its IMF payment. Then suddenly, in the early hours of Saturday, Prime Minister Alexis Tsipras asked for extra time to enable Greeks to vote in a referendum on July 5 on the terms of the deal.

Creditors flatly turned down this request, leaving little option for Greece but to default.

Long lines formed outside many ATMs yesterday. A banking source in Greece who requested anonymity said that only 40 per cent of the cash machines now had money in them.

The European Commission, in an unusual move that underlined its frustration with the Greek government, published yesterday what it said were the last proposals creditors made to Athens before Greece broke off funding talks.

IMF boss Christine Lagarde told the BBC that there was still time for the Greek government to change course. She also said that if the July 5 vote produced "a resounding yes" to remain in the euro zone and fix the Greek economy, then the creditors would be willing to make an effort.

REUTERS, AGENCE FRANCE-PRESSE, BLOOMBERG

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A version of this article appeared in the print edition of The Straits Times on June 29, 2015, with the headline 'Greeks face shut banks as creditors reject bailout'. Print Edition | Subscribe