Greece’s prime minister has called a referendum on 5 July for voters to decide whether to accept a bailout deal offered by international creditors. Alexis Tsipras made clear he was against the “unbearable” bailout plan.
Parliament is debating whether to ratify the vote, and some queues have been seen outside banks in Athens.
Eurozone finance ministers are meeting to discuss the crisis, and to decide whether to give Greece an extension of the bailout until after the vote. The current bailout expires on Tuesday, the same day Greece’s IMF debt is due.
It is unclear what would happen if Greece does not get a temporary extension. Without a deal on the bailout, there are fears Greece’s economy could collapse.
Germany all but buried negotiations to keep Greece from default on Saturday, saying a surprise decision by Greek Prime Minister Alexis Tsipras to call a referendum had left nothing to discuss but how to cope with failure.
Some Greek banks were beginning to limit cash transactions as hundreds of people lined up outside branches and drained cash machines after Prime Minister Alexis Tsipras called a referendum that could decide his country’s fate in the euro.
Two senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece. A central bank spokesman said it was making efforts to supply money to the system.
Some banks were placing limits in daily bank note and ATM transactions. Yiota Kardogianni, a manager at a branch of Piraeus Bank SA, said cash withdrawals were limited at 3,000 euros ($3,350) daily and ATM withdrawals at 600 euros. Alpha Bank AE had set a daily limit of 5,000 euros for most of its branches since last week.
Two senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece. A central bank spokesman said it was making efforts to supply money to the system.
Some banks were placing limits in daily bank note and ATM transactions. Yiota Kardogianni, a manager at a branch of Piraeus Bank SA, said cash withdrawals were limited at 3,000 euros ($3,350) daily and ATM withdrawals at 600 euros. Alpha Bank AE had set a daily limit of 5,000 euros for most of its branches since last week.
This is beginning to look a lot like the bank run that could bring matters to a head very quickly indeed.
Some initial questions . . .
Will the European Central Bank permit the Greek central bank to extend further (and there’s a clear danger that a lot more will be needed) Emergency Liquidity Assistance to keep the Greek banks afloat? Doing so risks increasing the losses to the rest of the euro zone in the event of Greece’s departure from the currency union (“Grexit”). Not doing so risks triggering the collapse of the Greek banking system.
Will those running the euro zone be prepared to keep the current bailout arrangements in place (they are due to expire on June 30) until the referendum result is known?
Clearly much of what the “independent” ECB decides to do (the first question) will depend on the answer to the second question.
With Greece having lurched into uncharted territory, predictions are good for very little, but I have to guess that capital controls are on the way. And soon.
How will Greece vote? Please re-read what I wrote about predictions. That said, Prime Minister Tsipras remains popular, but most Greeks want (unwisely but understandably) to stick with the euro, a currency that they still see as a break from the country’s chaotic past, a currency that remains a better home for what’s left of their savings than a new drachma would be.
“Events” may well transform the political dynamics in the next few days, but I can still see Greeks voting for the bailout deal in a way that keeps them in the euro, while giving Tsipras the political cover he needs to sign it. That’s one reason why the euro zone leadership might be prepared to keep things going for a few days more.
There will, of course, be plenty of talk about Greek democracy in the next few days. That ordinary Greeks are being given the chance to vote on the proposed terms of their country’s bailout is, in my view, a good thing. At the same time, it’s worth noting that the voters in the countries that are being asked to provide the money (for just the latest in a series of bailouts they were once promised could never happen) are not being given the same privilege.
Finally, as a helpful reminder both of the fallibility of predictions and of the hubris that surrounded the early days of the euro, let’s go to the Financial Times, for decades a slavish supporter of closer European integration and, of course, the single currency.
Here’s an extract from its “Lex” column (a column that prides itself on a cold-eyed take on the financial markets) on January 8, 2001:
With Greece now trading in euros, few will mourn the death of the drachma. Membership of the eurozone offers the prospect of long-term economic stability.
It didn’t then. It doesn’t now.