Greece closes banks to stop currency run

ATM withdrawals limited; EU lists referendum points

Members of leftist parties burn a European Union flag during a protest in the northern Greek port city of Thessaloniki on Sunday.
Members of leftist parties burn a European Union flag during a protest in the northern Greek port city of Thessaloniki on Sunday.

ATHENS, Greece -- Greece's five-year financial crisis took a dramatic turn Sunday, with the Cabinet deciding after an eight-hour session that Greek banks would remain shut for six business days and restrictions would be imposed on cash withdrawals.

photo

AP

People line up to use an ATM at a bank in central Athens, Greece, on Sunday.

The Athens Stock Exchange would also not open today, financial sector officials confirmed.

The decision came on the recommendation of the Bank of Greece, Prime Minister Alexis Tsipras said during a televised address to the nation.

For the past two days, Greeks have been rushing to ATMs to withdraw money across the country after Tsipras' sudden weekend decision to call a referendum on creditor proposals for Greece's budget in return for vital bailout funds.

The government is urging Greeks to vote against the proposals, arguing that they are humiliating and that they would prolong the country's financial woes.

The referendum decision, which was ratified by Parliament after a 13-hour session that ended in the early hours of Sunday, shocked and angered Greece's European partners. The country's negotiations with its European creditors have been suspended, with both sides blaming each other.

The referendum is set for next Sunday. But Greece's current bailout package expires Tuesday, and the $8 billion remaining in it will no longer be available to Greece after that date.

Without those funds, Greece is unlikely to be able to make a $1.79 billion International Monetary Fund loan payment due the same day.

Tsipras said he had renewed a request for the bailout to be extended by a few days to allow for the referendum -- a request which was rebuffed during the weekend by Greece's European creditors.

Earlier Sunday, the European Central Bank decided not to increase the amount of emergency liquidity Greek banks can access from the central bank -- meaning they have no way to replenish fast-diminishing deposits. The emergency loan program had been propping up Greek banks for weeks as the banking system neared insolvency after panicked account holders withdrew billions of euros.

"It is now more than clear that this decision has no other aim than to blackmail the will of the Greek people and prevent the smooth democratic process of the referendum," Tsipras said.

"They will not succeed. These moves will have the exact opposite effect. They will make the Greek people more determined in their choice to reject the unacceptable ... proposals and ultimatums of the creditors," he said.

A decree published this morning in the official Government Gazette stipulates that banks will not open this morning and would remain closed through July 6. The finance minister could decide to shorten or extend that period.

Withdrawals from ATMs will be capped at $66 daily.

Web banking transactions would be mostly free, allowing Greeks to pay bills online. However, they cannot move money to accounts abroad.

Credit and bank cards issued abroad can be used at ATMs with no restrictions, benefiting foreign visitors to Greece and its tourist industry.

For emergency needs, such as importing medicines or sending remittances abroad, the Greek Treasury was creating a Banking Transactions Approval Committee to examine requests on a case-by-case basis.

The European Central Bank, while refusing to expand emergency funds to Greek banks, did not cut off support entirely, which will provide the government some flexibility in the coming days.

The European Central Bank's decision to cap the emergency loan program, as opposed to canceling it, "allows the Greek banks to remain in a sort of coma -- not functioning but not dead," said Karl Whelan, an economics professor at University College in Dublin.

The European Central Bank has said it could reconsider its decision on credit levels.

"We continue to work closely with the Bank of Greece, and we strongly endorse the commitment of member states in pledging to take action to address the fragilities of euro-area economies," central bank chief Mario Draghi said.

Yannis Stournaras, governor of the Bank of Greece, said the bank would "take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances."

Some officials called for renewed efforts by both sides.

"We don't know -- none of us -- the consequences of an exit from the eurozone, either on the political or economic front. We must do everything so that Greece stays in the eurozone," French Prime Minister Manuel Valls told France's i-Tele TV earlier Sunday.

"But doing everything, that means respecting Greece and democracy, but it's also about respecting European rules. So Greece needs to come back to the negotiating table," he said.

President Barack Obama and German Chancellor Angela Merkel spoke by phone Sunday and "agreed that it was critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the eurozone," according to the White House. Merkel was expected to make a public statement today in Berlin.

Christine Lagarde, managing director of the International Monetary Fund, who has at times been sharply critical of Greece's negotiating stance, released a softer statement, declaring her "commitment to continue to engage with the Greek authorities."

The European Commission offered Greek voters a 10-point plan for bailout requirements Sunday, urging Greece to stay in the euro area.

The list reflects the state of negotiations as of 8 p.m. Friday. At that point, talks broke down when Tsipras announced he would seek a referendum. It's being published now "in the interest of transparency and for the information of the Greek people," Commission President Jean-Claude Juncker said in a Twitter post.

Juncker will hold a news conference in Brussels today, the commission said. The list of measures was never finished or presented to euro-area finance ministers alongside an "outline of a comprehensive deal," because of "the unilateral decision of the Greek authorities to abandon the process," the European Union's executive arm said.

The plans were endorsed by the European Central Bank and the International Monetary Fund, the commission said. The commission said the plans take into account Greek proposals from June 8, June 14, June 22 and Thursday, as well as subsequent political and technical talks.

Sales tax, pension and labor market changes are among the measures spelled out in the creditor offer. The plan calls for Greek authorities to "recognize that the pension system is unsustainable and needs fundamental reforms," to fully implement a 2010 pension law and to start introducing budget cuts.

Public wages, tax collection and corporate taxation were also included. The measures are in a list of "prior actions" that Greece would need to pledge in order to stay in the bailout program and get further aid disbursements.

"To those who wonder what's next: one, Greece should stay in euro; two, the door is still open for negotiations on latest EU commission proposals," European Economic Affairs Commissioner Pierre Moscovici said in a Twitter message.

Drivers flooded gas stations across Greece, spooked by rumors concerning impending fuel shortages, prompting the country's largest refiner, Hellenic Petroleum, to issue a statement that there are sufficient reserves of gasoline to last several months. On the streets of Athens, reactions to Tsipras' referendum call were mixed.

"I have no idea what we are voting for. Yes or no, we don't know what to say," 67-year-old Triandafila Bourbourda said as she walked in the capital's main Syntagma Square. "I think we shouldn't have gone so far to get into this mess."

But Voula Lambrou, attending a Sunday morning church service, said she believed Greece would be better off outside the 28-nation EU.

"If we exit the European Union, I believe things will be very good for Greece," she said. "It will be tough for some time, but we will be able to find strength in order to carry on ahead. We don't need the Europeans."

Information for this article was contributed by Elena Becatoros, Demetris Nellas, David McHugh, Geir Moulson and Jamey Keaten of The Associated Press; by Rebecca Christie of Bloomberg News; and by Jim Yardley, Landon Thomas Jr., Niki Kitsantonis, Andrew Higgins, James Kanter, Alison Smale and Melissa Eddy of The New York Times.

A Section on 06/29/2015

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