In Greece, many tap ATMs; others cut off

Eurozone warns of referendum outcomes

People line up at an ATM on Monday outside a bank in Athens, Greece. The Greek government has imposed a daily withdrawal limit of $66.
People line up at an ATM on Monday outside a bank in Athens, Greece. The Greek government has imposed a daily withdrawal limit of $66.

ATHENS, Greece -- Worried pensioners waited at closed bank branches Monday, and long lines snaked to ATMs as Greeks endured the first day of economic controls ahead of a referendum Sunday.

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AP

Greek banks were closed Monday and will remain shut until next Monday, and the government is implementing capital controls to address its financial crisis after Greece was unable reach agreement with creditors on its bailout program.

That vote could determine whether the country retains the euro currency or returns to the drachma.

Greece is dealing with a financial crisis after government leaders failed to reach an agreement with creditors. The nation is running out of time to get the money it needs to stave off bankruptcy.

Failure to secure funding has stoked fears of a crippling bank run, a Greek debt default and an exit from the euro. As a result, the country's government Sunday imposed strict capital controls, including a daily withdrawal limit of $66 from ATMs.

Pensioners gathered outside bank branches Monday hoping they might open. Many older Greeks were cut off from their money because they don't have ATM cards and make cash withdrawals in person.

"I came here at 4 a.m. because I have to get my pension," said 74-year-old Anastasios Gevelidis, one of about 100 retirees waiting outside the main branch of the National Bank of Greece in the country's second-largest city of Thessaloniki. "I don't have a card. I don't know what's going on. We don't even have enough money to buy bread."

The capital controls come ahead of a $1.8 billion payment Greece is supposed to make today to the International Monetary Fund. It's unlikely to pay that without financial assistance.

Greece's bailout program with its European creditors expires today, meaning the country will not have access to any of the money still available if it doesn't secure a deal.

The European Central Bank -- which is keeping the Greek banking system alive with almost $100 billion of emergency liquidity assistance -- hasn't said how it would classify or react to a missed IMF payment, and a spokesman declined to comment Monday on what position the Frankfurt-based bank would use.

Policymakers would have to take any missed payment into account when they discuss the level of assistance for Greek banks Wednesday, with the outcome having implications for Greece's membership in the euro. The three major credit-rating companies say failure to pay the Washington-based IMF wouldn't constitute a default because that term is reserved for private-sector creditors, and the IMF avoids the word.

For months, the Greek government has failed to agree on a package of spending cuts and reforms demanded by creditors in exchange for access to the remaining $8.1 billion in rescue loans.

The sight of an economy on the precipice hit global markets hard Monday. In Europe, the Stoxx 50 index of leading shares ended 2.5 percent lower, and Germany's DAX slid 3.6 percent. In the U.S., the Dow Jones industrial average fell 350.33 points, or 2 percent, to 17,596.35. The Standard & Poor's 500 index and the Nasdaq composite also fell more than 2 percent.

There also were early warning signs that Greece's problems may prove contagious -- the borrowing rates of other highly indebted eurozone countries such as Italy and Portugal inched up slightly.

Greece has been struggling to find a solution to its debt troubles for years, but the speed with which its government called a referendum on the bailout terms and shut its banks has caught some investors off guard.

"Most people's consensus forecast was for them to muddle through with some kind of a deal," said Kymberly Martin, the senior market strategist at the Bank of New Zealand, "so it has taken people a little bit by surprise."

The Standard & Poor's rating agency cut Greece's credit rating further into junk status Monday, saying it now sees a 50 percent chance of Greece leaving the eurozone. The Greek government's decision to hold a referendum is a sign it "will prioritize domestic politics over financial and economic stability, commercial debt payments and eurozone membership," it said in a statement.

Investors are worried that should Greece leave the euro and say it can't pay its debts, which stand at more than $337 billion, it will be forced into a return to the drachma and, analysts say, raise questions about the long-term viability of the euro currency.

"The major market concern is that if Greece were to default and/or exit, then it might encourage others to do the same," said Gary Jenkins, chief credit strategist at LNG Capital. "Thus it puts the entire eurozone project at risk of collapse."

Greece Prime Minister Alexis Tsipras is advocating that Greeks reject the proposals in the referendum, which increasingly has the look of a vote on euro membership itself.

That message was hammered home by European leaders.

"I'd like to ask the Greek people to vote yes. I very much like the Greeks, and I'd say to them, 'You should not commit suicide because you are afraid of death,'" European Commission President Jean-Claude Juncker said in an emotional speech against a backdrop of giant Greek and European Union flags.

Negotiations with Greece were not dead, German Chancellor Angela Merkel and her deputy insisted -- as long as Greeks support that path in the Sunday vote.

"It must be crystal-clear what is being decided: It is essentially the question, yes or no, to remaining in the eurozone," German Vice Chancellor Sigmar Gabriel said.

Throughout Greece, long lines formed at gas stations, with worried motorists seeking to fill up their tanks and pay with credit cards while they still were being accepted.

Although credit- and cash-card transactions have not been restricted, many retailers were not accepting card transactions Monday.

Electronic transfers and bill payments are allowed, but only within Greece. The government also stressed that the controls would not affect foreign tourists, who would have no limits on cash withdrawals with foreign bank cards.

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

Tsipras announced the capital controls in a televised address Sunday, blaming eurozone finance ministers for their rejection of an extension request to the bailout program.

The referendum decision, which has been ratified by Parliament, shocked and angered Greece's European partners.

In Greece, citizens were dividing into two camps -- with most of the opposition backing a "yes" vote in the referendum.

"If you want to stay in the euro, vote yes. ... If you want banks to open, vote yes. ... And most important, if you want to stay in Europe, vote yes," former Prime Minister Antonis Samaras told lawmakers.

Chanting "Take the bailout and go!" thousands of pro-government protesters gathered outside Parliament late Monday to back the government's call to vote no.

"The government tried too hard to get this agreement. But the creditors kept asking for more," pensioner Satroula Noutsou said. "I don't know what else we are supposed to do."

Information for this article was contributed by Derek Gatopoulos, Costas Kantouris, Elena Becatoros, Lorne Cook, Raf Casert, Lori Hinnant and Pan Pylas of The Associated Press and by Scott Lanman, Paul Gordon, David Jolly and Keith Bradsher of Bloomberg News.

A Section on 06/30/2015

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